We often speak to people who are concerned about what is showing on their bank statements after reading some urban myths and inaccuracies the internet.
This article should hopefully put things right about what mortgage lenders do look for on your Bank Statements a part of your application.
The first thing is to ignore what you read in the papers. Their job is to sell papers, increases readership and sell adverts and grabby headlines are part of the process, even if they are misleading. There is an old saying “never let the the truth get in the way of a good story”.
What are the papers saying?
We have seen stories along the lines of “Having a take away can stop you getting a mortgage” and other similar headlines/stories.
There is a very small amount of truth in that sentence on some very rare occasions.
What is the truth?
When lenders look through bank statements they are doing it for a couple of reasons.
The first reason is to check that your income is as you have said.
The second is to check the general conduct of your account. By that they are looking for bounced direct debits, any commitments not mentioned, living in an overdraft or going over your overdraft. You can probable guess why this is the case. Someone who has been constantly overdrawn for a year of more can be regarded as more of a ‘credit risk’.
The last reason is where the very small element of truth may come in to play. Most lenders assess your expenditure using Office of National Statistic (ONS) figures which are generic figures for things like Utility bills and food. However, some lenders will look at your latest 3 or 6 months bank statements and average out how much you spend on Utility bills, meals and food etc.
Going off the last paragraph, you can probably see that a single take away on a Saturday night (or one smashed avocado on toast for Millennials) is very unlikely to be the deal breaker on your Mortgage application, even if you ordered a take away every Saturday night. It is unlikely to be the end of the world with your Mortgage application.
Worst case scenario would be the lender reduces the mortgage amount. However, as most lenders do not assess affordability in this way, the chances of it actually being an issue are very very slim.
How can Mortgage Success help?
It is our job to know how lenders will assess your application prior to applying. As part of that process, we will also check affordability in the same way as the lender we apply to, so there is no reason for there to be any issues down the line.
Our job is to package your application for the lender in a way that helps to speed the process up, prevent mistakes and give you the best possibility of acceptance.
What mortgage lenders do look for on Bank Statements is how you manage your finances and that your income being deposited into you account is what you put on the application, the odd bottle of wine from Bargain Booze, Smashed Avocado on Toast or UberEats are not the red flags the media makes them out to be.