How can a lender know you're living well within your means?

It basically goes like this: here (the Netherlands) debt is registered, including what your monthly payments on those debts are. When you want to get a new loan you go to the bank with proof of income, they then look at your existing debt / payments and make an estimation of your cost of living. You will only be approved for a loan if monthly payments for current and the new loan + cost of living < your income.

You’re not supposed to be able to borrow more than you can afford the payments on.

Of course you can still get into trouble if you have a sudden drop in income, but at that point you can’t get any additional loans.

They also register non-payment of debts, not just on loans but also on things like energy bills, rent, cell phone plans, etc.

The best situation is that they have no records on you, because that means that you have no outstanding debt and no failures to pay.

Someone else already replied, but about living within your means, lenders can look up other debts you have, and missed payments you have. And they all request access to your pay slips so they get a basic view of your income. In the end it's close to the credit score system, with the difference that someone who doesn't have any loans or credit cards willl also have a good score since they don't have any missing payments, and haven't gathered too much debt already, which makes sense.

Regarding your point of rent vs ownership. In the end you can still boil it down to needing a certain amount of money/month. Only part of it is your mortgage of course, you need to save up for bigger things, but it's not that different. And i don't even see this being relevant in this discussion, i don't see how the credit score system would predict you being up to being a house owner and setting money aside for bigger repairs.