What indicates a borrower has been approved for a mortgage?

A borrower's approval for a mortgage is typically determined through various assessments and documentation, but the loan-to-value (LTV) ratio plays a critical role in that process. The LTV ratio is calculated by dividing the loan amount by the appraised value of the property. A lower LTV ratio is generally viewed more favorably by lenders as it indicates less risk—meaning the borrower is funding a greater portion of the property value through their own equity.

When a borrower is approved, it often means that the LTV ratio meets the lender’s guidelines, enabling the loan to move forward. Therefore, a solid understanding of LTV helps in gauging whether a borrower is likely to be approved for that mortgage.

While signature authorization, a good faith estimate, and credit score analysis are integral parts of the mortgage process, they serve different purposes. Signature authorization confirms that the borrower agrees to the terms of the loan, the good faith estimate outlines the expected costs of the mortgage, and credit score analysis evaluates the borrower's creditworthiness. None of these elements alone specifically confirms the approval of a mortgage as definitively as the loan-to-value ratio does.