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What do banks look at when applying for a mortgage?


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Hi people,

 

I will be applying for a mortgage in the next few upcoming months and just want to know what sort of things banks will look for in my bank statement.

 

For instance, will they look at each individual transaction (whether it be a car loan or just something bought off ebay)? How much detail will they go into my bank statement?

 

Also, my phone bill is up and down, for example:

Month A: £42.99

Month B: £54.45

Month C: £72.99

Month D: £42.99

 

Will they query why this fluctuates and what I did for my phone bill to increase?

 

If you could let me know this, that would be great.

 

Thanks in advance.

 

Dan

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There are different kinds of expenditure to consider:

  • Committed expenditure - This is loans, mortgages and credit cards
  • Essential cost of living costs - Food, Utilities, transport and other things you simply cant live without.
  • Additional cost of living - These are the other costs, gym memberships, life assurance, holidays, eating out etc.

 

Committed expenditure is going to be verified by credit checks and backed up by bank statements. Always download copies of a few credit reports and understand the numbers as defined there, rather than your own perception of them. Ie, a credit card balance might get paid every month, but as far as the lenders are concerned there is always balance outstanding. Dont forget about student loans either.

Essential cost of living is going to be determined by Office of National Statistics data in almost every case. If you are frugal this is bad for you as in your postcode and demographic the average food, utilities etc bills might be higher than you. If you are not, then actually you might get the benefit of this lower average. Technically a broker or lender should consider the higher of the two, but its unlikely anyone is going into that much detail.

Additional costs need to be declared. Big ones are school fee's or nursery costs, everything else is usually so small it rarely factors into the equation and often if its something that could be curtailed, lenders wont worry so much about it.

 

You will send up bank statements primarily for a couple of reasons:

  • Fraud: Do the net amounts on payslips translate to what's paid in the bank accounts. From here they can check if the Gross amounts are actually calculated correctly and determining if your payslips are fake.
  • Credit disclosure: Not everything shows on every credit report, so lender use the bank statements to spot credit card payments not already disclosed for example.

 

Honestly if your mortgage amount hinges on £30 difference in a phone bill it's going to be a tough application!! Of course i would say this, but get a broker, hand them the credit report, payslips and bank statement and you should very quickly get a max borrowing figure from both the cheapest lender and a cost from the lender that will lend you the most. Unless your income fluctuates significantly those figures should be fairly stable.

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

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I think Stuart covers off a lot, all I would add is that most lenders use ONS figures.

So they are not looking at your individual expendutre as such (although they are likely to check your expenditure is not out of the ordinary), they are will just use generic figures. Some lenders will do it on a case by case basis, but not many,

593bf45cd4cd8_MSlogo-whitebg.jpg.fc897e9d2835cdb10334f2ac387669b0.jpg

Whole of Market Mortgage Brokers

 

Any posts on here are for information and discussion purposes only and should not be seen as Mortgage advice.   

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@Stuart  - thank you for your explanation, really helpful. i am going to book in an appointment with a mortgage advisor to talk this through :)

 

Re the £30 difference of phone bill, it was only a one off month, every other month, ranges between 45-55 quid depending on the numbers I need to call. If it was just a one off month, would this still be tough?

 

Thanks,

Dan

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No. What i meant was that if £30 was enough to affect your affordability you are already stretching ving to the limit and anything discovered during the underwriting process could derail the whole application. I generally recommend the client works on about 90% of the max loan figures we get from the calculations to account for unforeseen factors.

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

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