What do Mortgage Lenders Look for On Bank Statements?

Ever wondered, What do Mortgage Lenders look for on Bank statements? In this insight, we will take a closer look at what lenders are looking for in your bank statements, how many months of statements are required, what to include in your statements, tips for organising and presenting them, and the common pitfalls to avoid. By following these best practices, you can ensure that your bank statements are in good order and increase your chances of a successful mortgage application.

Key Takeaways

• When applying for a Mortgage, consider in advance that you may be required to supply bank statements.
• Lenders look through all your transactions to check for anything out of character with your application.
• Run your bank account as best as you can in the lead-up to applying for a Mortgage.
• Avoid unplanned overdrafts, suspicious, and joke transactions. This can lead to delays with your application and possible rejections.

What do mortgage lenders look for on bank statements?

Lenders use bank statements to get a clear picture of your finances, including your income, expenses, and overall financial behaviour. This helps them to determine your eligibility for a mortgage and to ensure that you can afford the monthly payments.

When reviewing your bank statements, lenders are looking for a few key pieces of information. Firstly, they want to ensure that your income is stable and reliable. This means they will be checking that your wages are paid regularly into your account and that the amount matches the net amount on your pay slip. Any discrepancies in this information can raise red flags and cause delays in the application process. 

Lenders are also looking at how you manage your finances on a day-to-day basis. They will be checking for things like bank charges, bounced direct debits, and standing orders. These issues can indicate that you are not good with money and could struggle to keep up with your mortgage payments. Unplanned overdrafts can also be a problem, but arranged overdrafts are usually fine. It's important to ensure that you have at least three months of good conduct leading up to your mortgage application.

Another key consideration for lenders is your committed expenditure. This includes things like rent payments, unsecured debt, service charges, ground rents, child maintenance, school fees, nursery fees, and any other regular expenses you have.

Finally, lenders may also look at your spending habits, including any gambling activity. While gambling is not necessarily a problem, if it is done to excess, it can raise concerns for lenders. If you enjoy gambling, it's best to do it on a separate account that is not linked to your main day-to-day banking.

How Far Back Do Mortgage Lenders Look at Bank Statements?

Lenders will require at least 3 months of bank statements. If your financial situation is more complex, they may ask for more. For example, If you are self-employed, they may ask for six months or more statements to ensure that your income is stable and reliable.

It's important to note that even if you bank with the lender, you may still be required to provide bank statements. This is because underwriters often do not have access to internal systems and need to see the statements to verify your financial behaviour.

Best Practices for Preparing Bank Statements for a Mortgage Application

To ensure that your bank statements are ready for a mortgage application, there are several things you should include:

Three months of bank statements

As mentioned earlier, most lenders require at least three months of bank statements when you apply for a mortgage. It is important to provide statements from all of your accounts, including current accounts, savings accounts, and credit card accounts.

All sources of income

Your bank statements should show all of your sources of income, including your salary, any rental income, and any benefits you may be receiving.

Your expenses

Lenders will also look at your expenses to determine whether you can afford a mortgage. Be sure to include all of your regular expenses, such as utility bills, insurance payments, and loan repayments.

Regular savings

Lenders also want to see that you are saving regularly. If you are not currently saving, consider starting to save a small amount each month to demonstrate your financial responsibility.

Tips for Organising and Presenting Your Bank Statements

When it comes to presenting your bank statements for a mortgage application, organisation is key. Here are some tips to help you organise and present your bank statements:

Highlight important transactions

If there are any transactions on your bank statements that are particularly important, such as a large deposit, highlight them. This will draw the lender's attention to the relevant details.

Be consistent

Make sure that the format of your bank statements is consistent across all three months. This will make it easier for the lender to compare the statements and ensure that everything is accurate.

Keep it organised

Organise your bank statements in chronological order and make sure that they are clearly labelled with the month and year. This will make it easier for the lender to review them.

Common Pitfalls to Avoid When Submitting Bank Statements

When submitting bank statements for a mortgage application, there are several common pitfalls that you should avoid. Here are some things to keep in mind:

Avoid unplanned overdrafts

If possible, avoid going into overdraft on your bank account in the months leading up to your mortgage application. This can raise red flags for lenders and make it more difficult to get approved for a mortgage.

Watch your spending

Lenders will be looking at your spending habits, so it's important to be mindful of your spending in the months leading up to your application. Avoid making large purchases or taking on new debts during this time.

Be honest

It's important to be honest when providing bank statements for a mortgage application. Lying about your financial situation can have serious consequences, including being denied for a mortgage or even facing legal action.

Avoid suspicious transactions

Avoid any transactions that could raise red flags for lenders, such as large cash withdrawals or transfers to unfamiliar accounts.

Misinformation

It's important to keep you bank informed of any changes to your addresses or name. Your mortgage application must be consistent with your bank accounts. If you have recently moved or changed name and have not updated your bank account, it could lead to a requirement for further evidence of your new address or name change. 

Joke transaction descriptions

Joke references should be avoided as they can raise questions and delay the approval process. 

For example, if a borrower has a joke reference on a transaction that read "money for drugs". Even if it is a joke, it will have to be removed from the latest three months of bank statements before the application can be approved. 

A delay could also arise if a transaction uses the description "loan". Using a description that could indicate a regular expense may lead to questions by the underwriters, further delaying the approval.

It's important to be mindful of the information on you bank statements and avoid using potentially problematic references, even in jest.

Next Steps of applying for a Mortgage

Bank statements are an important part of the mortgage application process. To ensure that your bank statements are ready for a mortgage application, make sure to include all sources of income, expenses, and savings, and organise your statements in a clear and consistent manner. Avoid common pitfalls, such as going into overdraft or making large purchases, and always be honest when providing your bank statements. Now you know the answer to the question, What do mortgage lenders look for on bank statements, you can increase your chances of getting approved for a mortgage. If you're unsure where to start with seeking advice, complete the Sunny Fact Find.

FAQs

So, what do mortgage lenders look for on bank statements? In summary, they're looking to verify what you tell them is accurate. If you say you have an income, they will be able to crosscheck that against your statements, if you have a loan, they will be able to see that by cross-checking your bank statements. If you are upfront and honest with your lender, you won't encounter any issues with your bank statements.