Specialist Mortgage Advice in Sheffield
During the mortgage application process, your lender will ask you to provide a handful of documents to aid your application. One of the most important pieces of evidential documents that they will require are your bank statements.
Your bank statements allow your lender to get an insight into how you spend your money and how much you manage to save each month after your bills and recurring payments are met. They need to see these documents to make sure that you’ll be able to afford a mortgage.
If they can see that you are a responsible applicant who can manage their finances, then you are more likely to be accepted by them for a mortgage in Sheffield. Lenders need to be confident that they are going to be lending to someone who is going to be able to keep up with their payments and be able to afford all of the costs that come with owning a home.
What bad things are lenders looking for?
Gambling transactions
Gambling transactions are one of the first things that a lender will see on your bank statements. If you gamble, you need to be aware of this. Whether it’s now and again or all of the time, it’s likely that a lender will bring up the transactions sooner rather than later. Unfortunately, the more that you gamble, the lower your chances of getting a mortgage (in comparison to someone who doesn’t gamble at all).
If you barely gamble, you’ll hardly know the difference. Your lender will be able to see a few transactions, however, they shouldn’t be too bothered by them. It’s not illegal, but you should know that gambling agencies always say “please gamble responsibly”.
No one can tell you how to live your life, but what we can do is advise that you be responsible, especially during the months leading up to your mortgage application. You may struggle to get accepted if you are frequently losing money because of gambling.
Put yourself in their shoes, would you lend money to someone who gambles all of the time or someone who never gambles? Lenders will only lend to a borrower that is reliable.
Dipping into your overdraft
Lenders won’t be too happy if you are always dipping into your overdraft. If you are only using it every few months or so, your lender may be more lenient, however, if it’s every single month, your chances of being accepted for a mortgage may be lowered. If you are exceeding your overdraft limit on a regular basis, lenders may not take it lightly and could even be put off.
As we mentioned before, lenders don’t take gambling transactions very well, especially if they come in large numbers. If you are dipping in and out of your overdraft because of gambling, lenders may have little interest in your application. Having a combination of the two leading factors to why lenders can sometimes turn away applications on your bank statements unfortunately never ends well.
Loan repayments
Showing that you are more than capable of repaying loans on time is a good indication to your lender that you are reliable. If you are able to meet these types of payments easily, it should benefit your application.
However, this could end up causing a negative effect on your application if you are taking out too many loans. Yes, it can be good to pay off loans to show that you can manage your finances and meet payments, but on the other hand, it also shows that you maybe didn’t have the money at the time that you applied for the loan and you hoped that you would be able to pay it off once the time came. As a Mortgage Broker in Sheffield, we always recommend that you be extremely cautious when applying for extra loans, especially when you are beginning the mortgage process.
Bounced direct debits
Bounced direct debits come about when pre-arranged fees are charged to your account, yet you don’t have sufficient funds to pay the fee. For example, if you have a mobile phone contract, you’ll have a recurring bill which will usually go out monthly. If you forget about this bill and end up moving/spending money in the account, the provider will try and charge you, even though you have nothing in your account. This will show up as a bounced payment. This doesn’t look good on your bank statements and your lender may think that you are unreliable.
This doesn’t just apply to mobile phone bills, it also applies to credit card charges, and memberships/subscriptions. Essentially, for anything that you’ve made a pre-arrangement to pay back, you must have the funds in place to meet the payment, otherwise, the payment will bounce.
You need to make sure that you are meeting and keeping up-to-date with your ongoing financial commitments. if you don’t, your payments will bounce and you may end up having reduced chances of being accepted by your lender.
What good things are lenders looking for?
Managing your finances
Now that we’ve had a look at the things that lenders don’t want to see on your bank statements, let’s take a look at what they want to see.
Firstly, they want to know exactly how you manage your finances. This could mean clearly showing how you’ve built up your savings and evidence that for the past few months, you’ve been putting money into a savings account and not taking any back out. Or it could even be as simple as that you have lots of spare cash left at the end of the month, either way, this should make your application look impressive.
Tax payment planning, prudent spending and budgeting your expenditures are useful ways to help you manage your money. The more disposable cash that you have left at the end of the month, theoretically, the more of a competitive mortgage deal you should be able to access.
Evidence
A lender may be impressed by your bank statements, however, they will always question, “where is all of the money coming from?”.
You will need to prove where your money has come from, e.g. your income and bank transfers. This works both ways, if there are large transfers going out of your account, you will also need them backed up. On a side note, if you are Self Employed in Sheffield you will need to provide your latest 2 years’ tax calculations and corresponding overviews.
Proof of deposit is a huge part of your mortgage application process and so is evidencing your incoming and outgoing lump sums of cash that are listed on your bank statements. If you can evidence these easily, your lender should gain further trust in you and your application, making you more likely to get an offer from them.
How can I improve?
As a Specialist Mortgage Advisor in Sheffield, we always advise that our customers get ahead of the game and plan ahead. This is the most sensible approach. Think responsibly and make sure that you are making yourself and your mortgage application stand out.
You need to be aware that your bank statements will show your salary credits, your regular bill payments and your bank transfers. This is why it’s very important that you make sure that everything is evidenced correctly and paid off in time before you apply to your lender. We sometimes suggest that you take a break from gambling during the months leading up to your mortgage application; this way your bank statements will be in the best light possible.
If you need help during any point of the mortgage application process and want expert help with making your bank statements show your reliability, feel free to get in touch with our mortgage broker in Sheffield.
Date Last Edited: September 15, 2023
