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Can Bank Statements Affect A Mortgage Application?

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You’ll need to provide three to six months of bank statements when you apply for a mortgage. Lenders use bank statements to verify your income, look at your spending habits and assess the affordability of the mortgage you apply for. Some applicants will be declined for a mortgage due to something on their bank statements.

So can bank statements affect a mortgage application? Yes! Let’s take a closer look.

Why do mortgage lenders want to see bank statements?

Mortgage lenders will look at your bank statements before offering you a mortgage to check if you can afford to repay the amount you are borrowing. They use them to check both your income and your outgoings.

First things first, speak to a mortgage adviser to discuss your mortgage options. Our preferred mortgage advisers have a 5-star Trustpilot rating from over 5,000 reviews.

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Your home may be repossessed if you do not keep up repayments on your mortgage.

If you’re employed, the lender will be looking at how much you are paid each month as part of its affordability assessment.

The affordability assessment will also look at your outgoings. These will include household bills, childcare costs, debt repayments and everyday spending. The lender will want to see that the amounts you declare as regular outgoings tally with the figures on your bank statements.

If you’re applying for a joint mortgage, the lender will want to see bank statements from both of you.

What do mortgage lenders see as red flags on bank statements?

There are some items on bank statements that could cause concern to lenders. These include:

  • Regular or large online gambling transactions
  • Use of payday loans or other high-cost credit
  • Use of buy now, pay later services such as Klarna
  • Excessive spending on non-essential items
  • Regular overdraft use
  • Untraceable cash deposits

Withdrawing lots of cash from ATMs is seen as a red flag by lenders, because there is no paper trail for them to see what the money was spent on. Most illegal purchases are paid for in cash.

If you’re self-employed, regular cash deposits might suggest you are asking to be paid in cash in order to evade tax.

Find Your Mortgage

Your home may be repossessed if you do not keep up repayments on your mortgage.

How do I submit my bank statements to my mortgage lender?

Your mortgage lender might accept electronic PDFs of your bank statements. These can be downloaded from your online banking account.

Some lenders require hard copies. You’ll need to request these from your bank if you don’t normally receive paper statements.  

A mortgage broker will let you know what you need to provide with your mortgage application.

Your lender will also ask for proof of where your deposit funds come from. This money might be from savings or a gift from your parents.

Do mortgage lenders look at spending habits?

Yes, lenders will look at your spending habits when you apply for a mortgage.

They won’t be worried about most everyday spending unless you spend large amounts of money on unnecessary items you can’t afford.

Lenders are also wary of ‘joke’ payment references from friends. So, ask any friends who owe you money not to put things certain wording in as a ‘joke’ as the payment reference.

Lenders will also look at how much you spend on debt repayments when they look at your bank statements. Obviously, paying your debts on time is a good thing but you should aim to only have low levels of debt, if any, at the time you apply for a mortgage.

What to do if you’re declined for a mortgage

Try and find out why, if you’re turned down for a mortgage. If the rejection is due to something on your bank statements, you could be able to rectify the situation and apply again in a few months’ time.

If the lender thinks you can’t afford the mortgage you have applied for you might need to revise your homebuying plans and look for a cheaper property.

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Your home may be repossessed if you do not keep up repayments on your mortgage.

Last Updated: January 9th, 2023

Phil Spencer

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