The main reason a mortgage lender will need to see your bank statements is to gain a better understanding of you as a person and what your regular spending habits tend to be like. The way you have been conducting your finances lately and the presentation of this on your bank statements can make a big difference in the amount a lender will let you borrow, if they’ll even lend at all.
This is because of the risk presented to lenders by a poor financial history. A lender needs to have complete confidence that you are responsible with your income and can be trusted to handle finances in the appropriate manner. Let’s be honest, taking out a mortgage is going to be one of, if not the biggest financial commitment you will ever make in your life and is not something you should just rush headfirst into.
You are able to easily obtain bank statements either in the post from your bank, over the counter from your local bank, or as is a common occurrence nowadays, as a printable version from your bank’s online website or application.
Now for the big question. What will the lender actually be looking for? What factors may flag up in their checks?
Well as we touched upon, they need to know you are responsible and reliable with your income. Something they will take a look at is if there are any overdrafts. Using an overdraft occasionally is not necessarily a bad thing, but if you are exceeding your limit quite often, this is going to make the lender question whether or not they can trust you.
Additional factors to look out for are potential returned Direct Debits, which could possibly indicate to a lender you are not consistently reliable, as well as not disclosing loans at application stage, something that will reflect on you rather poorly if the lender finds outgoings on your bank statements that you neglected to tell them about. Going back to before, they have to trust you.
Some other things to be wary of are any missed payments for personal loans or any credit cards you may have. If you are able to demonstrate that you can handle your money well and can consistently meet monthly payment deadlines, you will be more likely to borrow the amount you would like from the lender.
We find ourselves being asked this question quite a lot. Unfortunately we regularly find that customers end up stuck due to a history of gambling behind them. Having some fun once every blue moon is relatively harmless, but if you are constantly throwing large amounts of money at casinos or high street gambling establishments, whether you’re making the money you put into it back or not, a lender will look at your case less than favourably.
To learn more, please take a look at our article on “Do Gambling Transactions Look Bad on My Bank Statements?”
From our experience of helping out a lot of different First-Time Buyers in Bristol & Home Movers in Bristol, we have found that the majority of lenders prefer to have at least three months bank statements from a mortgage applicant.
Bearing this in mind, it’s time to think to the future and leave the past in the past. You have at the very least, three months to improve your handling of finances. The first thing we’d recommend to customers, is if you make frequent trips to the local bookmakers or attend the online gambling scene, you should look at taking a break for a while. This not only benefits you financially, but also can massively help your mental health too.
The next steps we would recommend taking is to do your best to pay off any current debts you have, without the use of an additional credit card. Also, eating in rather than eating out, reducing unnecessary purchases and cancelling any subscriptions you don’t need, are all really useful ways of freeing up additional cash to ensure you can pay all your bills on time.
The basics of all this is that you be sensible and create a plan for yourself with plenty of time ahead of what you’re looking to achieve. The further away you go from debt and financial troubles, the better your chances with a lender will be.
No matter if you’re a First-Time Buyer, Moving Home or Self-Employed, it’s always important to manage your finances well. If you have a bad credit history and aren’t sure of what your options are, you can always take Specialist Mortgage Advice in Bristol by Getting in Touch with us today. We’ll advise you as well as we can, working hard to further you through the mortgage process.