Bank Statements and Mortgage Applications
, by Matt Stevens
When applying for a mortgage, whether you’re a first-time buyer, buying a second home, or a buy-to-let investor, you’ll be asked to submit recent bank statements to your lender.
In this article, we’ll go over the reasons why mortgage lenders request access to your banking history, what specific details they scrutinise, and the kinds of financial activity which could hinder the application process. We’ll cover:
How Many Months’ Worth of Bank Statements Will I Need For My Mortgage Application?
How to Prepare Your Bank Statements for a Mortgage Application
How Can My Bank Statements Affect My Mortgage Application?
Mortgage lenders need bank statements to build a clear picture of your financial behaviour. They want to evaluate how you manage your money, including your income, outgoings, and overall spending habits.
This insight plays an important part in how much they’re willing to lend you, or if they’re willing to lend at all. In essence, lenders must be confident that you’re a trustworthy borrower. If your financial habits suggest otherwise, your application may be declined.
What Do Mortgage Lenders Look For On Bank Statements?
When reviewing your bank statements, mortgage lenders are assessing your financial health to determine whether you’re a reliable borrower. Areas of focus include:
Consistent income: Regular payments into your account that align with your stated salary or earnings help confirm financial stability.
Responsible spending patterns: Lenders prefer to see sensible, steady spending. Large, erratic transactions or withdrawals might raise concerns.
Debt commitments: Your current financial obligations are reviewed in relation to your income to calculate your debt-to-income ratio, a key factor in affordability.
Verified savings or deposit funds: If your deposit is coming from savings or is gifted, lenders will expect to see a legitimate source of these funds alongside a documented transaction history and, in the case of gifts, a signed declaration verifying it’s not a loan.
What Do Lenders Not Want to See On Bank Statements?
Lenders carefully review your bank statements for signs of financial behaviour which indicate risk. The following issues can negatively affect your mortgage application or even lead to outright rejection:
Failed payments and returned direct debits: A pattern of bounced payments or failed direct debits suggests poor money management and that you’re struggling to meet existing financial commitments.
Unverified or unusual deposits: Substantial cash sums or unexplained transfers, particularly from overseas, can cause doubt about the source of funds and potential money laundering.
Gambling activity: Frequent or high-value gambling signals financial instability or impulsive spending habits, both of which are red flags to lenders.
Heavy reliance on overdrafts: While occasional overdraft use is common, excessive reliance suggests that you’re living beyond your means.
Undisclosed debt: Failing to declare payday loans, credit cards, or other forms of borrowing can damage your credibility.
How Many Months’ Worth of Bank Statements Will I Need For My Mortgage Application?
In most cases, mortgage lenders will ask for between three and six months’ worth of bank statements to review your income, spending, and financial stability.
However, if your financial situation is more complex, such as if you're self-employed or have variable income, then some lenders could request additional months of statements to gain a better idea.
Are Bank Statements Required If You’re Self-Employed?
If you’re self-employed, whether as a business owner, sole trader, or contractor, you’ll still be asked to provide bank statements as part of your mortgage application.
In addition to this, most lenders will require one to three years’ worth of accounts and SA302 tax calculations, along with accompanying tax year overviews. These documents demonstrate that your income is sustainable over time, giving lenders confidence in your ability to meet future mortgage repayments.
Do I Need to Provide Statements For All My Bank Accounts?
Not necessarily. You only need to supply statements for the accounts that are relevant to your mortgage application. This includes those where your income is paid, where your house deposit is held, or where you keep savings or other funds you intend to use to support your application.
How Do I Submit My Bank Statements to My Lender?
Generally, mortgage lenders will accept digital copies of your bank statements in PDF format, which you can usually download directly from your online banking account. That said, a lot of lenders still request printed copies. These can either be printed at home or obtained from your bank branch.
How to Prepare Your Bank Statements for a Mortgage Application
If you’re planning to apply for a mortgage in the coming months, it’s wise to start preparing your bank statements in advance because presenting them in the best possible light can make a significant difference. Here are some steps to help you do so:
Keep your finances organised: Make sure all income and typical outgoings are clearly traceable.
Stick to a budget: Minimise luxury spending and any large, non-essential purchases during this period.
Stay out of the overdraft: Aim to maintain a healthy account balance and avoid dipping into your overdraft unless absolutely necessary.
Maintain consistency with your income: Ensure your salary or main source of income is paid into the same account each month, and don’t switch accounts close to your application.
If you’re worried that something in your banking history may be a red flag, it’s advisable to speak to a mortgage broker before applying. They can estimate the potential impact, advise on how to address the problem, and recommend lenders more likely to take a flexible view of your circumstances.
At The Mortgage Genie, our team of expert brokers has extensive experience in securing clients mortgage deals tailored to their individual circumstances, even if their financial position involves bad credit. If you’re interested, give us a call today at 01915809890. And why find out how much you could borrow up to today by using our mortgage calculator?
The above blog has information contained within which was correct at the time of publication but is subject to change.
