Quick Answer: What Do Mortgage Lenders Look For On Bank Statements?
Mortgage lenders may use bank statements to help verify your income, regular outgoings and financial commitments against the information provided in your application. Statements can also provide evidence relating to your deposit and where money has come from.
If you are worried about a particular purchase appearing on your statements, one transaction will rarely explain the whole picture. Lenders have their own affordability assessments and lending criteria, so they can consider your wider finances and any supporting evidence they request.
Being accurate matters. Provide the complete documents requested and explain anything that genuinely needs clarification rather than trying to change how your finances appear before applying.
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Why Do Mortgage Lenders Ask For Bank Statements?
Bank statements can provide evidence to support information given elsewhere in your mortgage application.
A lender needs to assess whether the mortgage is affordable based on your circumstances. This involves looking at your income alongside your outgoings and existing financial commitments. Your statements may help verify some of those figures.
For example, regular salary payments can support the income information you have declared. Direct debits and other recurring payments can provide evidence of commitments that need to be considered as part of affordability.
The exact checks and documents required depend on the lender and your circumstances. You should therefore follow the document requirements given for your particular application rather than assuming every lender takes the same approach.
What Do Lenders Check On Bank Statements?
There is no universal checklist that every mortgage lender applies to every bank statement. There are, however, several areas that may be relevant when a lender reviews the information you have supplied.
Income Paid Into Your Account
A lender may use your statements alongside other documents to verify your income.
If you are employed, this could mean checking that salary payments appearing in your account are consistent with your payslips and the income declared on the mortgage application.
The process can be different where some of your earnings come from overtime, bonuses, commission or another source. Lenders have their own criteria for the types and amounts of income they will take into account.
Self-employed applicants can also face different evidence requirements. If you work for yourself, understanding how self-employed mortgages work can help you prepare for the income and supporting evidence a lender may request.
What matters is that the information provided on your application is accurate and can be supported by the documents the lender requests.
Regular Bills And Financial Commitments
Lenders consider your outgoings when assessing mortgage affordability.
Your bank statements may show regular payments such as household bills, childcare costs and existing credit commitments. Loan repayments and other ongoing financial obligations can also be relevant.
A lender may compare information visible on your statements with the expenditure and commitments declared elsewhere in your application.
You should therefore provide accurate figures rather than leaving out a commitment because you think it could reduce the amount you can borrow.
Existing Credit And Debt Repayments
Credit commitments can affect mortgage affordability because repayments reduce the amount of income available for mortgage payments and other living costs.
Bank statements may show payments towards loans, credit cards or other forms of borrowing. A lender can also use information from your credit report as part of its assessment.
If you have existing borrowing, declare it accurately when required. Trying to conceal a debt or temporarily moving money between accounts does not provide a reliable picture of your finances and could create inconsistencies in the application.
Where an issue with affordability, existing commitments or credit contributes to a refusal, our guide explains what to do if your mortgage application is declined before you consider making another application.
Regular Spending
Mortgage applicants sometimes worry that lenders will go through their statements and judge every coffee, meal out or subscription.
That is an unhelpful way to think about mortgage bank statement checks.
Lenders assess affordability using their own criteria and may consider your regular expenditure alongside income and financial commitments. This means your overall outgoings can be relevant, but there is no universal list of everyday purchases that automatically prevents somebody from getting a mortgage.
You also do not need to create an artificial version of your normal finances before applying. Focus instead on making sure the information supplied about your income, spending and commitments is accurate.
What Can Raise Questions On Mortgage Bank Statements?
Some activity may lead a lender to ask for more information or could form part of its wider assessment. Whether it affects the mortgage application depends on the circumstances and the lender’s criteria.
Regular Overdraft Use
Using an authorised overdraft does not automatically mean a mortgage application will be declined.
A lender may, however, take account of your financial position and existing commitments when assessing affordability. Persistent overdraft use can therefore be relevant to the wider assessment, particularly where it indicates that expenditure is regularly exceeding the money available in the account.
An occasional use of an arranged overdraft and continued reliance on borrowing are different circumstances. How either is treated depends on the lender and the rest of the application.
If you regularly use an overdraft, tell your mortgage adviser about it so that your actual financial position can be considered before an application is submitted.
Returned Or Missed Payments
Returned direct debits or missed payments can attract attention because they may indicate that there was not enough money available when a payment was due.
The context matters. A single historic incident does not automatically have the same significance as an ongoing pattern of difficulty meeting financial commitments.
Missed payments may also appear on your credit report depending on the type of account and how the provider reports information.
If you are currently struggling to keep up with repayments or other essential bills, consider seeking appropriate debt advice before taking on additional borrowing.
Large Or Unexplained Transfers
A large payment into or out of your account is not automatically a problem.
There may be a straightforward explanation. You might have transferred money between your own accounts, received money from the sale of an asset or been given money towards your deposit.
Where a transaction is relevant to the application or deposit, you may be asked to explain it and provide evidence.
Keeping records can make this easier. If you have moved savings from one account to another, retaining statements from both accounts can provide a clear trail showing where the money came from.
Gambling Transactions
Gambling appearing on a bank statement does not automatically result in a mortgage application being refused.
The effect, if any, depends on the lender’s assessment and the applicant’s wider circumstances. Frequent or significant gambling expenditure could be relevant where it affects affordability or forms part of a broader pattern of financial difficulty.
If this is something you are concerned about before applying, our existing guide explains in more detail whether gambling can affect a mortgage application.
You should give your mortgage adviser an accurate picture of your circumstances rather than trying to conceal gambling transactions before an application.
Worried About Something On Your Statements?
An unusual transaction does not automatically prevent you from getting a mortgage. An adviser can review the wider circumstances, explain what evidence may be needed and check relevant lender criteria before an application is submitted.
Do Mortgage Lenders Check Your Deposit On Bank Statements?
You will normally need to provide evidence of your deposit during the mortgage and home-buying process.
How that evidence looks depends on where the money has come from.
If you have built your deposit through savings, statements can help show the balance and history of those funds. Money transferred between accounts you own may require statements showing the movement from one account to the other.
A gifted deposit needs to be identified as such rather than presented as your own savings. The lender can have requirements concerning who can provide a gift and the evidence needed, so your mortgage adviser should check the relevant criteria.
Source-of-funds checks also take place within the wider property transaction. Your conveyancer has separate legal and regulatory responsibilities and may request evidence about where purchase funds originated.
Keeping a clear record of how your deposit was accumulated can make it easier to provide the evidence requested during the purchase.
Should You Explain Unusual Transactions?
If a lender or adviser asks about a transaction, give an accurate explanation.
An unusual payment can have a perfectly reasonable background. The important point is being able to explain relevant transactions and provide supporting evidence where required.
For example, if a large credit is simply money transferred from another savings account in your name, statements from both accounts may establish the trail. If money forms part of a gifted deposit, it should be declared and evidenced according to the lender’s requirements.
You should not alter documents, hide transactions or move money around simply to make a bank statement look different before applying for a mortgage.
Where you know that your statements contain something that could require explanation, discussing it with your mortgage adviser before the application gives them the opportunity to consider it alongside the rest of your circumstances.
How Many Months Of Bank Statements Do Mortgage Lenders Need?
There is no single number of bank statements required for every mortgage application.
MoneyHelper says applicants might be asked for current account statements covering the previous three to six months, but individual lender requirements can differ. Some applicants may also need to provide other statements or additional evidence depending on their income and circumstances.
Rather than preparing a fixed period based on a general rule, check exactly what the lender requires.
The format can matter too. Follow the lender’s current requirements for downloaded, printed or otherwise supplied statements instead of assuming any document format will be accepted.
How To Prepare Bank Statements For A Mortgage Application
Preparing your evidence does not mean trying to make your finances appear artificially different in the months before applying.
- Find out which accounts, statement periods and document formats are required.
- Provide complete statements rather than edited versions.
- Make sure your application accurately reflects your income and financial commitments.
- Keep supporting evidence for significant transfers, particularly where money has moved between your own accounts or forms part of the deposit.
- Raise anything that may need explaining with your adviser before the application is made.
Most importantly, do not take out borrowing, move money or conceal transactions simply to create a different impression of your financial position.
Can A Mortgage Adviser Check Your Bank Statements Before You Apply?
Speaking to a mortgage adviser before submitting an application can be useful if you are unsure how your circumstances may fit lender requirements.
At Key Mortgage Advice, an adviser can review your income, financial commitments and other information relevant to the mortgage before considering suitable options.
Key Mortgage Advice provides personalised mortgage advice with access to the whole of the market and exclusive deals where available. Your adviser can check relevant lender criteria and help you understand what supporting evidence may be needed for an application.
An adviser reviewing your statements cannot guarantee that a lender will approve the mortgage. The final lending decision remains with the lender following its own checks and assessment.
A Simple Example
Consider an applicant who has saved part of their deposit in a separate savings account and recently transferred the money into their current account ready for a property purchase.
The large incoming payment may be easy to explain because the applicant can provide statements showing the money leaving one account in their name and arriving in the other.
By keeping the relevant statements, the applicant has a clear record of the movement of their savings.
This is a hypothetical example rather than a Key Mortgage Advice client case. The evidence required in a real application would depend on the lender and the applicant’s circumstances.
Speak To Key Mortgage Advice Before Applying
Bank statements are one part of the information a lender may consider when assessing a mortgage application. If you are concerned about your spending, overdraft use, a large transfer or the evidence behind your deposit, discussing it before applying can help you understand what may be relevant.
Key Mortgage Advice can review your circumstances and help you consider mortgage options across the whole of the market. Where a suitable option is identified, the team can support you through the mortgage process from application towards completion.
You can call us on 01772 620000 to discuss your circumstances or book an appointment with a mortgage broker in Preston, Southport or Garstang before submitting an application.
This article provides general guidance, not personal financial, legal or tax advice. Lending criteria, product terms and eligibility vary. Seek advice based on your circumstances.
Mortgage Bank Statement FAQs
How many bank statements do lenders need?
Requirements vary between lenders and according to your circumstances. MoneyHelper says applicants might be asked for current account statements covering the previous three to six months, although a lender can request different or additional evidence.
Check the requirements for your particular application.
Can overdraft use affect a mortgage?
It can form part of a lender’s assessment, particularly where an applicant relies regularly on an overdraft or it affects their wider financial position. Using an overdraft does not automatically mean a mortgage will be declined, and lender criteria vary.
Do mortgage lenders check large transfers?
A lender may ask for information about transactions relevant to your application or deposit. Large transfers can have legitimate explanations, including movements between your own accounts. Keep evidence that clearly shows where relevant funds came from.
Should I explain unusual transactions?
If your lender or mortgage adviser asks about a transaction, explain it accurately and provide any evidence requested. If you already know that something on your statements may need clarification, raising it with your adviser before applying can help them assess the situation against relevant lender requirements.
