Applying for a mortgage? 3 things you can't have on your bank statement
(Last Updated: 17/09/2024)
24/05/2022
24
9 min read
Applying for a mortgage can be pretty scary. There's no guarantee that at the end of the mortgage application process, you'll walk away with the home loan you'll need to buy your property.
In particular, if your mortgage underwriter finds that you've made payments for certain items, it may result in their rejecting your whole application. Expanded upon below (click on the links), these are:
Update Feb 2019: If you're trying to work out more generally why you can't get a mortgage, please read our article: What Stops You Getting a Mortgage?
It's worth working out what you can afford before you start!
Even if you think your mortgage application will be successful, you definitely need to 'have your eyes fully open' regarding how affordable your home purchase will be overall, taking into account all living costs and mortgage repayments.
Please use this excellent mortgage calculator to learn more.
The fact is that post-April 2014, after the Government rolled out its Mortgage Market Review (MMR) measures the mortgage application process has become much more stringent. Nowadays you have to give in-depth information from your bank statement about what you spend each month including on, but not limited to:
- loans
- hire purchases
- insurance payments
- petrol
- socialising (nights out, pubs, restaurants, holidays)
- childcare
- gym memberships
If you are struggling to get a mortgage then our mortgage brokers can help - Call us for a free mortgage consultation on 0333 344 3234.
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If you are applying for a mortgage these are 3 things you can't have on your bank statement:
1. Online Gambling
The online gambling market in the UK was worth £2 billion in 2012 and since then, online gambling platforms have positively mushroomed in number, user base and funds handled. The appetite for this gambling fix is clear, however surely the odd flutter can’t hurt your mortgage application?
Mortgage lenders process thousands of mortgage applications every month and they’ll want to lend money to the lowest risk applicants first. Gamblers by nature are risk takers, betting that they’ll beat the odds. If you have regular payments leaving your bank account going to online gambling websites, then this can be picked up by mortgage lenders when they review your bank statement.
Worried about gambling?
Gambling is now very widespread in UK society and gambling addiction is a real and devastating issue. If you are concerned about the subject, please in the first instance visit the NHS's Help for Problem Gambling page. It provides advice and gives a number of additional useful links, including to the Gamblers Anonymous website.
Download your FREE Pre-Mortgage checklist
When you're applying for a mortgage, to help you buy what is probably the most expensive item you've ever bought, pre-preparation is absolutely vital. Use our essential checklist to ensure you haven't left out a detail which might derail your application
2. Unauthorised (or even authorised) Overdraft
Most people have an overdraft facility linked to their bank account which can range from £100 up to £2,000, depending on your income. If your bank statement shows that you regularly use overdraft then this indicates to a mortgage lender that you need the facility in order to get through all of your payments each month.
Can you get a mortgage with an overdraft?
As an overdraft isn't a formal loan agreement and can be called upon by the bank at any time (meaning you'd have to repay the money), mortgage lenders will be concerned if you constantly live inside of your overdraft facility; either because you aren't managing your spending or you simply cannot afford your outgoings (what you earn doesn't cover what you spend).
An unauthorised overdraft means you haven’t agreed a formal overdraft facility with your bank in advance and have withdrawn more money than you have in your account, or you have taken out more than your authorised overdraft limit.
You may think that you simply have to pay your bank or building society's charge, however to a mortgage lender it is showing that you run a high risk of not being able to pay your mortgage repayments due to over spending.
Remember, regular use of any overdraft demonstrates a lack of control over your finances and places you at a higher risk compared to other mortgage applicants.
It is good practice to only use your overdraft in emergencies and to clear it each month. It is bad practice, on the other hand, to use your full overdraft as your ‘zero balance’.
3. Pay Day Loans
The new pay day loans have become a regular ‘get out of jail’ for many people during months where they run out of cash before they get paid.
There are no official figures on how many people use this sort of borrowing, but Consumer Focus estimated that 1.2 million people took out 4.1 million loans in 2009.
Pay day loans are viewed as short term loans where borrowers get fast decisions on smaller loans with huge interest APRs, some more than4,000%.
What many people don’t know is that pay day loans leave a mark on your credit file and a massive red flag to mortgage lenders.
If you get a pay day loan a mortgage lender will assume you to be a higher risk as you require the credit facility of these loan providers.
In fact, after speaking to some mortgage advisers, we were informed that some mortgage applications could be turned down purely based on this.
If you are looking to apply for a mortgage and have any of the 3 items mentioned above on your bank statement, our mortgage advisors can help you best proceed with your application - please call 0333 344 3234.
Time is the greatest healer for bad credit
Getting a mortgage is a serious process and few high street mortgage lenders want to take on applicants with high risk, cash hungry habits.
However don’t give up if you are looking to get a mortgage if you have any of the above three payments leaving your bank account.
The best advice from most mortgage brokers is to stop using these financing facilities and don’t apply for a mortgage until at least 6 months has elapsed since you last used them.
You should also stay on top of your credit report on a monthly basis.
Social Media
Digressing purely from the red flags you might have on your bank statement, social media postings are an area where what you post might derail your mortgage application.
The fact is that an increasing number of financial companies such as insurers, lenders and even the taxman are taking using social media platforms to check that what you tell them about yourself is accurate.
So you should be aware that lenders might access information you publicly release on any of these platforms and, if anything you've published contradicts what you've told them, it might scupper your mortgage plans.
- A mortgage broker apparently had a client which a lender refused to grant a mortgage to because of his stated job history on LinkedIn, specifically a discrepancy about how long he'd been self-employed. Regarding this platform, the best advice is don’t lie about matters like what your job title is or how long you've been with a particular firm.
- Regarding Facebook posts, one expert quoted in media reports stated that these posts might reveal if a person applying for a residential mortgage is actually intending to let a property out, for example, or the reverse situation, if a person appears to want a buy to let mortgage but actually intends to live in the dwelling.
- Facebook and Instagram posts might also reveal, for example, if an applicant is lying about their relationship status. They may claim that they have split with a partner – perhaps because their partner has an undesirable credit history – but their Instagram posts might have pictures of cosy, romantic-looking dinners with that partner. The same can also be true for a reverse situation; someone might claim to be involved with a partner because it suits them in terms of household income but they might in reality have split from that person.
Additionally, a new generation of technology companies claim that they can predict your financial behaviour based purely on what you post on Facebook and other social media.
One company, called Friendlyscore, which does this, states that its service is designed to help those customers who do not have a credit history and therefore will struggle to borrow money or take out credit agreements. Friendlyscore at least requires you to give it access to your various social media accounts and email - you can select which ones to include and exclude.
The simple facts are that if you are in any way intending to pull the wool over the eyes of a prospective lender, your social media posts might offer easily-acquired evidence of your fraud. As with most things in life, it's always advisable to 'play a straight bat'.
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Frequently Asked Questions
It is easier to get a mortgage with a larger deposit and a better credit rating. Ten tips to make finding a mortgage easier:
- 1
Check your own credit rating first. That way you can take steps to improve it before involving a broker.
2Go through a broker, as making mortgage applications which are doomed to fail, will decrease your chances even with the right lenders for you.
3Fix errors on your credit score, with each credit bureau.
4Join the electoral register
5Write to the credit agencies and ask for a notice of 'disassociation' from anyone you have ever applied for joint credit with
6Try to limit your spending to 25% of your total credit limit, but at least less than 50% and try not to use your overdraft at all
7Close old unused credit accounts
8Pay your bills on time and cut back on spending
9Don't apply for other credit close to your mortgage application
10Top up your deposit (by as little as £100) If you are putting down a 10% mortgage, put a slightly higher deposit down. Increasing it by just £100 or more will look better than just meeting the minimum deposit exactly.
As well as checking and looking to improve your credit rating, you'll want to start gathering the following documents:
- Passport or driving licence (to prove your identity)
- current account statements (3-6 months)
- Utility bills
- 3 months’ payslips
- P60 form from your employer
- Proof of any benefits received
- Form SA302 (if you have multiple sources of your earnings)
- Accountant's statement of two to three years’ accounts
- Form SA302
- Supporting evidence for form SA302
And, if self employed
2-6 weeks in most cases, but this can vary.
Written by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Reviewed by:
Caragh Bailey
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
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