Bank Statements and Mortgage Applications

Bank Statements and Mortgage Applications

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Author: Carl Shave - CEO and co-founder
Last updated: 26 May 2024

For many people, a bank account is the primary means of managing money by paying in, and paying out for bills. The fact that this is how nearly everyone manages their day-to-day finances is why you are likely to be asked for your bank statements when applying for a mortgage.

We’ve put a useful guide below with a few pointers as to why your bank statements are required by some lenders, and debunk some of the myths that some people believe.

What do mortgage underwriters look for on bank statements?

Whilst a lender will have a large amount of data at their disposal, including your credit report, they are not able to look at the actual activity in detail of your bank account. Your day-to-day transactions on your bank statements can give an accurate and up-to-date picture of your financial situation, and in turn can give a much clearer idea of what your finances are like.

So, what is a lender looking at on your bank statements? Well, it can vary from lender to lender, however these are a few of the main areas:

  • Salary credits. Most people have their salary and other forms of income paid directly into their bank accounts. A lender will ensure these appear on the statements and in turn tally up with any other documentation you have provided, eg payslips.
  • Unpaid items. Whilst a lender will likely have access to your credit file, this may not be up to date at the time you apply for your mortgage, and also may not show where a payment has been made late rather than not paid at all. Unpaid items can be an indication that you are not managing your finances as well as expected.
  • Unauthorised borrowing. Lenders are not averse to you borrowing money that is within your means, and it is typically perfectly ok with them if you have an overdraft. What lenders are not so keen on is where an agreed overdraft facility has been exceeded. Whilst your bank may have permitted this to happen, it can again be an indication of possible financial strain to a mortgage provider.
  • Unusual transactions. Our day-to-day financial living is generally very similar each and every month with the same or similar amounts going into our bank accounts, and the same level of bills, etc going out. Lenders may focus on one-off or unusual transactions where seen. For example this could include larger than usual credit entries. Of course, this does not mean anything is wrong, but do expect them to ask further questions in relation to this if required.
  • The electronic age has enabled people to finance their bets via transfers from their bank accounts, and where a lender sees multiple entries in relation to this it could be a sign of financial difficulties.
  • Your personal information. With the age of internet banking, the days of actually getting a bank statement sent to you in the post is virtually well and truly behind us. Online security is also vitally important and as such personal information is treated with the utmost respect. However, when providing your bank statements do ensure they clearly show that they are yours. You will obviously know this, but a lender needs to see that you are the named account holder and if it does not show your name they have no way of verifying the account. As such ensure the statements show your name and where possible your address.
  • A lender will ask you to disclose your monthly commitments on your application and in turn will likely cross-reference these with your credit report, however, the credit report may not be 100% accurate and on occasion people forget about certain regular payments they make. These regular payments may not be in relation to a form of credit, however they may still need to be disclosed. These could be items such as car lease payments and maintenance payments.

Whilst there is much on your statements a lender will focus on, there are entries that they are not as concerned about, but some are still worth noting in advance where possible.

  • Rude or confusing entries. Whilst a lender is not concerned with what a narrative is for a transaction it can cause confusion. Bear this in mind with any of your family and friends that could use these types of words when paying in funds to your account.
  • Personal interests. Everyone is different and we enjoy a variety of things in life. Whatever your interests this is of no concern to a lender as long as it is not affecting your finances and it’s legal.
  • Who you bank with. No judgement is made simply based on who you have your bank account with. You should also not be penalised in any way if you do not bank with the company you are applying to for your mortgage.

Remember, whatever entries you have on your bank account, a lender must treat these with the strictest confidence and are bound by the Data Protection Act. Do not cross through entries on your bank account that you do not wish people to see. A lender will not accept a bank statement that has been defaced in any way and indeed by doing this could cause further concern that you are trying to conceal something of relevance to your application.

How many months’ bank statements do I need for a mortgage?

The number of bank statements you will need to provide will vary from one lender to the next, and indeed even down to your individual application and circumstances. It’s best to work on the assumption that your bank statements will be requested in all circumstances, however, it may be that these are not requested at all. As a general rule, regardless of your loan to value, if you have had credit difficulties in the past expect a lender to ask for your bank statements, usually a minimum of between 3 to 6 months. If you have a good credit history, your loan to value could now influence a lender’s decision in regard to seeing your bank statements. The lower your LTV the lower the risk so, for example, if you are borrowing 95% of the property value expect to provide bank statements, whereas if you are borrowing 75% or below they may now not be required.

On occasion you may be asked for more than the typical 3 to 6 months such as 12-months’ bank statements. This is certainly not very commonplace but may be relevant in situations such as when a lender needs evidence of the your 12-months’ rent being paid.

It’s worth pointing out that when a lender asks for a certain period of your bank statements that period must be covered. For example, if they ask for three months, make sure the transaction period covers a full three months, even if it means you may be showing more than this in total. If you are even a day out in covering the full 3-months’ transactions, a lender will likely still ask for this and in turn this will delay your application.

You may also be asking, do mortgage lenders check all bank accounts? This is likely to be the case if you run multiple accounts. A lender may still wish to see the required number of bank statements for each one, to have the full picture of your finances. They will see how many current accounts you have as these will show on your credit file.

Which lenders don’t ask for bank statements

All lenders reserve the right to ask for your bank statements and these could be requested at any point throughout the assessment process. As such there is no specific list of which ones do not ask for them.

A mortgage application with a specialist lender, eg one that caters for applicants with a bad credit history, will typically always involve bank statements needing to be seen. If you have a good credit history, you may find that some of the larger organisations may not request them. The likelihood of them being requested will fall even further if you also have a lower loan to value.

How can a mortgage broker help?

Whilst a mortgage broker cannot change what has already happened in relation to the entries on your bank statements, they are familiar with how different lenders work and what sort of view one lender may have over another. Mortgage brokers are also experienced in knowing how to best explain your finances and provide any explanations required for transactions that could potentially be highlighted by the lender. Pre-empting what a lender may ask and giving the explanation in advance should make the whole assessment process much simpler and quicker, plus possibly the difference between you being approved or declined.

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Carl Shave

CEO and co-founder

About the author

Carl Shave has been involved in the mortgage & finance industry since leaving education and is one of the co-founders of Just Mortgage Brokers. He has written guest posts and provided journalist comments for companies such as The Times, FT Adviser, Mortgage Strategy, Mortgage Solutions and others, demonstrating his extensive industry knowledge.