Is My FICO Score Really What's Used to Get a Mortgage?

Before the housing crisis of 2008 consumers could often get a mortgage with nothing but a good FICO score, because stated-income mortgage waived the income verification process. In 2011, mortgage providers are far more careful about who gets a mortgage, and a FICO score is usually just one piece of the puzzle to qualifying for a mortgage.

Identification

A borrower's credit history and FICO score are always important to a lender, but a good score will probably be the major factor in setting your interest rate. Most lenders have a chart that lines up the range in which a borrower's credit score falls and the interest rate for that tier. In 2011, for instance, only scores above 760 usually garner the lowest interest rate.

Debt-to-Income Ratio

Credit scores only tell a lender if the consumer is likely to pay back a loan on time every month, not his ability to pay. The most accurate picture of an ability to pay is the debt-to-income ratio. Lenders probably won't approve a mortgage until the borrower's monthly debt obligations fall below 20 percent to 35 percent of his monthly income. This typically includes only debts listed on your credit report, not monthly bills, such as a cell phone and utilities. Banks check tax returns and pay stubs to verify income.

Collateral

A low debt-to-income ratio and great credit score won't guarantee a mortgage unless you agree to put down some collateral. Banks want to know that you have some hard investment in the place and to prevent the mortgage from going underwater -- when the borrower's mortgage exceeds his equity in the property. In 2011, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have a pending rule that would require a 20 percent down payment or else the bank cannot sell the loan without retaining a 5 percent stake in the property, according to Credit Loan.

Other Factors

In general, mortgage providers want to see somebody with a stable life. This means holding a job at the same company for two years at the time of the application. A credit report also contains previous addresses and phone numbers. Constantly moving from state to state and switching phone numbers might signify to the bank that you are a flight risk or might lose track of the monthly bill with so much movement.