When applying for a mortgage, your lender will ask you for multiple different documents to support your application. One of the most important things that they will ask for are your bank statements.
Bank statements allow a lender to see exactly how an applicant spends their money. They will be able to analyse how often you spend your money, what you spend your money on and how much you have left each month.
Lenders want to see that someone is managing their money responsibly and will be able to maintain their mortgage payments each month. Lenders need to be confident when accepting an applicant, they will never accept an applicant that won’t be able to keep up-to-date with their payments.
One of the first things that a lender will notice on bank statements is gambling transactions. Whether it’s a common reoccurrence or a now again gesture, gambling rarely goes down well with lenders. Of course, the more that you do it, the harsher the impact on your chances of being accepted for a mortgage with them.
In fact, if you barely gamble, it won’t really make a difference to your application, your lender will be able to see a few transactions and probably allow it. There isn’t anything illegal about gambling, however, you should know that gambling agencies always say to “gamble responsibly”.
Neither us nor the lender can never tell you how to live your life but on the other hand, we can tell you to be responsible and be aware that you may struggle to get a mortgage if you are frequently gambling and losing monies in large sums.
You have to think as if you were in their shoes. Would you lend money to someone who gambles frequently or someone who never gambles? Lenders will only lend to a borrower that is reliable.
Lenders will not be impressed if you are consistently dipping into your overdraft. If you are only touching your overdraft now and again, your lender may not be too fussed by it, however, if it’s every single month, your chances of being accepted for a mortgage may be lowered. To make matters worse, if you are exceeding your overdraft limit every month, lenders will not take this lightly and could even be completely put off.
As you know, another thing that lenders look for on your bank statements are gambling transactions. If you are dipping into your overdraft because of gambling, lenders may have little interest in your application. Having a combination of the two leading factors to why lenders turn away applications on your bank statements unfortunately never ends well.
Showing that you are capable of repaying loans on time is a good indication that you are reliable. If you are managing to meet your payments easily, it will always look good on your application.
Furthermore, this can backfire though if you are taking out too many loans. Yes, it can be good to pay off loans to show that you can manage your finances to meet the payments, however, it also shows that you maybe didn’t have the money at the time that you applied for the loan and you hoped that you would be able to pay it off when the time came. Once again, as a Mortgage Broker in London, we advise that you be cautious with your finances and take a smart approach.
Bounced direct debits occur when pre-arranged fees are charged on your account and you don’t have the sufficient funds to pay the fee. For example, if you are on a mobile phone contract, you will have a recurring bill which is usually monthly. If you forget about this bill and end up spending the money that you needed to save, the provider will try and take the money from your account despite it have nothing in. This will show up as a bounced payment, and if it happens regularly, your lender may think that you are unreliable.
This doesn’t just apply for mobile phone bills, it also applies for credit card charges, memberships/subscriptions and basically anything that you’ve made a pre-arrangement to pay back.
To summarise bounced direct debits, make sure that you are keeping up-to-date with your ongoing financial commitments and that you are meeting bills and fees before their due dates.
Now that we’ve covered the things that lenders don’t want to see on your bank statements, let’s take a look at what they want to see.
Firstly, they want to see that you can manage your finances. This could mean clearly evidencing your savings and showing that for the past 3 months you’ve been putting money into a savings account and not taking any back out. It could simply be that you have lots of spare cash left at the end of the month, either way, this will look good and should impress your lender.
Tax payment planning, prudent spending and budgeting your expenditures are different ways to help you manage your money. The more cash that you have remaining at the end of the month, theoretically, the better mortgage deal you should be able to access.
A lender can be impressed by your bank statements, but where is all of the money coming from?
You’ll need to evidence where your money is coming from, e.g. your income and bank transfers. This does work both ways though, if there are large transfers going out of your account, you will need to back them up too. On another note, if you are Self Employed in London you will need to evidence your latest 2 years’ tax calculations and corresponding overviews.
Evidencing your deposit is a huge part of your mortgage application and so is evidencing incoming and outgoing lump sums of money that appear on your bank statements. If you can evidence these with no hassle, your lender should gain more trust in you and your application, making you more likely to get an offer.
As a Specialist Mortgage Advisor in London, we always advise applicants to plan ahead and always be sensible. Think responsibly and make sure that you are making yourself look the best that you can.
Remember that your bank statements will show your salary credits, your regular bill payments and your bank transfers. With this in mind, it’s very important that you make sure that everything is evidenced and paid off. It may even be worth taking a break from gambling during the months leading up to your mortgage application in London; your bank statements will be put into the best light possible this way.
If you need help during the mortgage application process and want assistance in making your bank statements show your reliability, feel free to get in touch with our Mortgage Broker in London.