Basics of Loan Qualificaton

There are three parts to qualifying for a loan. One, your down payment. Two, your debt to income ratios. And, three your Credit Score.
The amount of down payment reduces risk to lenders. Because of this they reward borrowers that put more money towards the purchase of the property. These rewards are lower interest rates, easier qualifying, and easing or elimination of Property Mortgage Insurance (PMI) requirements. Generally, a borrower will be required to invest at least 5% of the purchase price of the property and with PMI costs being eliminated at 20% down.
Debt to Income ratios play an important part in how much money a buyer qualifies to borrow. There is a Backend ratio and a Frontend ratio to consider. Lenders will only allow a percentage of income to go toward the mortgage (Frontend ratio) and towards all debt (Backend ratio) when qualifying for a loan. Lenders typically look for a 28% Front-end ratio. This is where only 28% of your income can be used towards a mortgage payment. The Back-end ratio is typically 36%. This is the percentage of income that can be used for the payment of all debt.