A mortgage decision rests on four separate assessments rather than a single score. Each addresses a different way the loan could fail, and any one of them can decline the application.
Income is tested for durability, not just size
Underwriting asks whether the income will still be there in several years. Length of employment, contract type and the variability of the earnings all feed into that judgment.
Salaried income with a long history is treated most favourably. Self-employment, commission and bonus income are typically averaged over multiple years or discounted.
The distinction is not about the amount. Two applicants earning identically can be assessed differently because one income is more likely to persist through a downturn.
Debt service ratios set the ceiling
Lenders compare the proposed payment, and the applicant's total debt payments, against income. Those ratios produce a maximum borrowing figure directly.
Existing commitments therefore reduce mortgage capacity even when they are being paid comfortably, because they occupy part of the same income.
This is why clearing a car loan or a card balance before applying can change the outcome more than a modest pay rise would.
The property is valued independently
The collateral is assessed separately from the borrower. A valuation establishes what the lender could expect to recover if the loan defaulted and the property had to be sold.
The loan is sized against that valuation rather than against the agreed purchase price, and where the valuation comes in lower, the buyer must cover the difference.
Property type matters here too. Unusual construction, short leases or units in over-supplied blocks can be lent against on tighter terms or refused entirely.
Credit history stands in for behaviour
Past repayment conduct is the closest available evidence of future conduct. Missed payments, defaults and recent applications for credit all register.
Recency is weighted heavily. A missed payment several years ago carries less weight than a pattern in the last twelve months.
Thin files present their own difficulty, since an applicant with almost no borrowing history offers little for the assessment to work with.
Stress testing prices in a rate that has not happened
Lenders check affordability against a rate materially above the one being offered, so a borrower is not approved solely on the strength of a low introductory payment.
The test reflects the reality that most mortgages outlive the rate they start on, and the payment will reset at whatever prevails then.
It also explains why maximum borrowing falls when rates rise faster than incomes: the stressed payment rises with them, and the ratio ceiling does not move.