other factors aside, the higher the DTI ratio, the less likely the borrower will be able to afford a monthly payment, hence the more risky it is for the lender. Pricing, including risk-based pricing and relationship-based pricing Pricing policy varies a great deal. While one probably can't influence the pricing policy of a given financial institution, one can: Shop around Ask for a better rate – some financial institutions will respond to this, some won't Price match – many financial institutions will match a rate for a current customer Pricing is often done in one of these ways. Follow the internal links for more details: Everyone pays the same rate. This is an older approach, and most financial institutions no longer use this approach because it causes low risk customers to pay a higher than market rate, while high risk customers get a better rate than they might otherwise get, causing the financial institution to get a lower rate of return on the loan than the risk might imply. Risk-based pricing. With this approach, pricing is based on various risk factors including loan to value, credit score, loan term (expected length, usually in months) Relationship based pricing is often used to offer a slightly better rate to customers that have a substantial business relationship with the financial institution. This is often a price improvement offered on top of the otherwise computed rate. Loan specific compliance requirements Many of the customer identification and due diligence requirements of loan origination are common to new account opening of other financial products. The following sections describe the specific requirements of loans and mortgages. Cross selling, add-on selling Add-on Credit insurance & debt cancellation Credit cross selling Up-selling Down-selling Refinancing Loan recapture Appraising collateral The next step is to have a Real Estate appraiser appraise the borrower's property that he wishes to have the loan against. This is done to prevent fraud of any kind by either the borrower or the mortgage broker. This prevents fraud like "equity stripping" and money embezzlement. The amount that the appraiser from either the borrower's side or the lender's side is the amount that the borrower can loan up to. This amount is divided by the debt that the borrower wants to pay off plus other disbursements (i.e. cash-out, 1st mortgage, 2nd mortgage, etc.) and the appraised value (if a refinance) or purchase price (if a purchase) {which ever