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How can my bank statements affect my mortgage application?
A common question that applicants ask a mortgage adviser is” how can my bank statements affect my mortgage application?”
The truth is, your bank statements are an important document when underwriting a mortgage, as they paint a picture of how your financial lifestyle looks.
Bank statements say what your monthly cash flow is like, which is extremely important when calculating whether you can afford to make your mortgage payments.
They verify your salary from your employer, in addition to your payslips, and give an idea what you draw from your business, in addition to your tax calculations and tax year overview statements.
They show a lender whether you live from your overdraft, or whether there are generally surplus funds at the end of the month.
How do you spend money monthly on things like gambling, regular eating and drinking out, subscriptions, payments to creditors, obligations such as maintenance and more, will likely show on your bank statements.
It is important for a lender to get a full idea of your financial situation to make sure that paying your mortgage is sustainable. If you’re not in a position to make the monthly repayments, you could end up having your property repossessed.
Lenders have a duty to make sure that they are lending fairly and not putting people in a difficult situation.
As a result, your mortgage adviser needs to understand your bank statements and financial lifestyle in general. It is important so they can give you the best advice.
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How can my bank statements affect my mortgage application if gambling transactions are showing?
If you have betting transactions showing on your bank statements, in some cases, this may cause a problem.
Lenders can be flexible towards gambling, as long as they believe it is only at a person’s leisure, and not going to put them under financial pressure.
If gambling is on a regular basis, such as daily, and not always from an applicant’s disposable income, this may result in a mortgage being declined.
Lenders do not usually have a set criteria for how much gambling is acceptable on an applicant’s bank statements.
However, it would be for the underwriter to use their discretion to make sure that they are being responsible when agreeing gambling mortgage applications.
Your mortgage adviser will likely need to know more as well. They will want to make sure that you are in a position to pay your mortgage, and that gambling is not going to prevent this.
They may talk to you about the frequency of transactions and explore whether it is for enjoyment purposes, or more.
Your mortgage adviser will want assurance that are you are going to be able to keep up repayments on your mortgage without gambling causing a negative effect on your finances.
You should also have a serious think about whether you believe you’re in a position to be making mortgage payments.
If you think the answer is no, proceeding with a mortgage may not be a good idea.
In this instance, you should speak with a professional mortgage adviser.
How can my bank statements affect my mortgage application if I am in my overdraft?
In general, being within your overdraft facility is not usually an issue to a mortgage lender, if you meet the rest of the lender’s criteria.
However, if you are going outside your agreed overdraft amounts, encouraging additional interest on the facility, this does not usually look good.
It may not always be enough for a lender to decline an application, but it does suggest that cash flow is a problem, so they may want a reason why this is happening.
If it is just a short-term cash flow problem due to a recent event (for example, unnecessary large purchase), the lender is likely to be more comfortable.
If it seems that you are going outside of your overdraft every month as you are unable to keep to your budget (or cannot afford to pay all of your outgoings on the amount of income that you received), this could be a problem.
Lenders need to ensure that you are going to be able to make your payments, so knowing that you receive enough money every month to cover your obligations in lifestyle, is important.
In this situation, you should talk to an experienced mortgage adviser.
They will look at your bank statements so they can assess whether they believe a lender will be happy with them.
It may be that you were going outside of your overdraft due to certain discretionary commitments, such as gym memberships or other clubs.
They may need confirmation that you would be willing to give up these commitments if it affected your ability to make payments towards your application.
What underwriters look for in bank statements.
Underwriters look for many things when they are going over a person’s bank statement.
For instance, they will be wanting to verify your income, in addition to the documents that you have received from your employer or the HMRC.
They would also be looking at how much mortgage payment you are paying at the moment, or what your rent is.
Sometimes loans, credit cards, mortgages and car lease payments do not always show on a credit file. If this is the case, the lender’s system may not have been able to pick these up.
Your bank statement will likely show the payments to these creditors, resulting in the lender needing to know more, such as the overall balance of the debts.
They will be looking at other monthly outgoings such as child maintenance, or payments towards other dependants, for example, elderly parents.
They will be getting an idea of your bills, and spending habits. Things like eating out, gambling and hobbies may be looked at.
If the underwriter believes that you are in a position to pay for your full lifestyle, and it will not impact your ability to pay a mortgage, they will usually move on.
How can my bank statements affect my mortgage application if direct debits are bouncing?
Bouncing direct debits never look good when you are applying for a mortgage.
If you are not currently paying your commitments, this can suggest that there a cash flow problem, which will be a red flag to lenders.
Depending on the commitments, this will likely be leading to adverse credit if you are not making payments to the providers or creditors.
Adverse lenders may be able to help you if there is good reason for this, and it is clear that post completion of a mortgage, you will be in a position to make all of your payments.
However, this will very much depend on the situation, what type of commitments have been missed, the value of them, and more.
In this situation, you should talk to a mortgage adviser with experience in adverse credit mortgages, to find out if you have any options.
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Do lenders look at bank statements when you apply for a mortgage?
Not all lenders request bank statements for mortgage advisers when you apply for a mortgage.
However, even lenders that do not request bank statements every application, have the right to do so when they feel necessary.
If they are not provided, the lender will not agree the mortgage application.
Mortgage advisers need to request bank statements to hold on file for a certain period of time.
They need to go through these to establish whether you are in a position to make payments on your mortgage, or not.
Mortgage advisors put their name against your mortgage application, demonstrating that they have given the mortgage advice.
Therefore, bank statements are an important part of the process that will need to be assessed.
How can my bank statements affect my mortgage application on a buy to let?
Bank statements are still important documents, even on buy to let mortgage applications.
Some buy to let mortgage lenders do not have a minimum income criteria, meaning that the amount of income that you receive is not so important.
However, you want to be sure that you are in a comfortable situation, and your finances are under control.
Although it is likely that your buy to let mortgage will be paid from rental that you received, sometimes the property may be empty.
As a result, some buy to let mortgage lenders want to make sure that cash flow at home is positive, and offering a loan to you is responsible.
Buy to let mortgage lenders may also be checking for other things, such as, verification of the amount of rent that you receive.
Your mortgage adviser will be able to give you a clearer idea of what will be needed from a buy to let lender, and the process in general.
If you have bad credit and the late payments are showing on your bank statement, see our related post: Bad Credit Buy To Let Mortgage
Conclusion
Bank statements are an important part of the mortgage underwriting process, as they paint a picture of a person’s finances.
They usually show a person’s income, commitments, debt payments, bills, lifestyle spending, and how a person handles their money in general.
A mortgage adviser should have a good idea of whether they believe you are the right fit for one of their mortgage products.
Going in excess of your overdraft facility, missing payments, or excessive gambling are all things that could negatively affect your mortgage application.
Taking professional mortgage advice is very important, to find out how your situation would affect your mortgage application.
It would be recommended to look for an experienced mortgage broker that can tell you what your options are.
If you would like I NEED ADVICE, to match you with a regulated and qualified mortgage adviser, please complete the contact form.
The information on this page is not tailored to any individual readers and should not be considered financial advice under any circumstances.
If you are seeking advice about a mortgage, you should consult a qualified professional.
