6 Mistakes to avoid with bank statements when applying for a mortgage…

 

When applying for a mortgage, many lenders will want to see your bank statements as a way of seeing how you manage money and your spending habits. Now your bank statements don’t need to be perfect to apply for a mortgage but there are a few things to avoid to give yourself the best chance of being accepted and making your application as smooth as possible, and they are: 

Exceeding your over draft 

Lenders like to see that you can stay within your overdraft limit as this is an indicator to them that you can handle credit. Using your overdraft is OK, as long as you don’t exceed it or are constantly in it. Try to only use it in emergencies 

 

Regular transactions to gambling websites are also a red flag to lenders. This can appear like addiction to the lender and this does not give them confidence that you will be in a position to maintain your mortgage if you are spending more and more money each month of gambling. This is all relative, if you are earning £2,000 per month for example but only gamble £20 each month that is ok. But if you are gambling £100s per month this poses a danger to lenders. If you are applying for a mortgage, limit your gambling in the months running up to your application. Ban yourself form gambling sites and set a time out. 

 

Large cash deposits into your bank that cannot be explained are a red flag for money laundering reasons. Small deposits can be explained or even large deposits that you have an explanation for are OK e.g. you have sold a car or your parents have transferred you money for your deposit. If they cannot be explained, lenders expect these to come from illegal sources. 

 

It seems funny at the time when you send your mate money for the tickets the bought or the meal they bought you, but name the transaction things like ‘money for drugs’ or ‘prostitute’ but transactions for illegal activity such as this can cause lenders to decline your application. No lender wants to be part of a deal that involves illegal activity or funds from illegal activity. 

 

Again this shows money mismanagement to lenders. Lenders need to be confidence that you can manage a large loan such as a mortgage, so using payday loans isn’t a sign of that for lenders. 

 

This also implies that you do not have enough money in your account to service the direct debits you have, this doesn’t give lenders confidence that you can handle a larger direct debit such as a mortgage. 

 

As always, speak with an independent broker for advice before applying for a mortgage. They will always be able to point you in the right direction.