Todays banking system processes individual mortgage applications based on the risk the they pose to the lender.By requiring a 'mortgage lending criteria' to assess the risk of each individual applicants borrowing power & financial capacity to repay the instalments that would be due for any debt outstanding should a loan be sucessfully taken out against the market value of a property.

This article serves as a primer of the necessary criteria a prospective or would be first time property buyer would need to meet in order to be able to finance a mortgage purchase.The key point to remember is that lenders want to see credibility in an applicant and use there criteria to determine this.Understanding the criterions is the first step into formulating a strategy to meet them - as uncovered in later articles.

Loan To Value/LTV - Why is this important to know?

The loan to value (or LTV abbreviated) is relevant as this is the maximum amount (or borrowing ceiling) a lender will loan and calculated as a percentage of the current market value of a property.For example purposes if a current market value of a house was £100,000 and a lender had a 95% LTV policy in its lending criteria,it would only be possible to lend a borrower £95,000 and not a penny more (i.e. 95%) regardless even if an applicant could demonstrate they was financially sound enough to be able to take on bigger debts.This is because the loan has to be secured by asset collateral of some sort.In reality,expect the LTV be around 85% and lower - much lower in fact due to slumped housing market at the time of this writing.