Most loan and mortgage options are dependent on one thing: your creditworthiness. Your creditworthiness is determined by a few different factors, but is mostly influenced by your credit score, your loan to value ratio (LTV) and your debt-service coverage ratio (DSCR). All these combined show lenders how trustworthy you are and how likely you are to pay back the money you borrowed in full.
Lenders will do a full credit-check on you and check your FICO credit score across all three credit card agencies. This is why it is often recommended that you improve your credit score before applying for a mortgage if your credit score is below 600. If your credit score is too low, most lenders will reject you immediately without even looking at the other facts that make up your creditworthiness.
If you have a low credit score and are not rejected right away, you may still face high interest rates because lenders may not trust you.
To calculate your LTV, lenders will divide the loan amount by the purchase price of the home.
If you put up a high down payment, lenders will most likely trust your ability to pay back the loan because it shows you are willing to invest a lot of your money into your new home.
Finally, your DSCR is calculated by dividing your net income by your mortgage payments. This helps lenders figure out your ability to pay your mortgage.
The higher your DSCR, the more willing a lender will be to negotiate your mortgage rate because they will trust your ability to pay back the money they lend you.
The only types of loans that do not rely as heavily on your creditworthiness are FHA loans and VA loans, as they are backed by the federal government and rely on different eligibility criteria.