When you apply for a mortgage, lenders do not just look at your income and credit score. They also take a close look at your bank statements to see how you actually manage your money.
For a lot of people, this part feels a bit uncomfortable. It is normal to worry about whether that one off purchase or takeaway habit is going to ruin everything. The good news is that lenders are not looking for perfection, but there are a few things that really can slow things down or even lead to a decline.
Here are four things lenders do not want to see on your bank statements and what you can do about them before you apply.
Why lenders look at your bank statements
Your bank statements show how your finances work in real life.
They help lenders check:
How consistent your income is
Whether direct debits are paid on time
How you use your overdraft
If there are any worrying patterns, such as heavy gambling or constant borrowing
Most lenders will ask for at least three months of statements, sometimes more. That means the way you manage your money in the run up to an application really does matter.
1. Heavy or regular gambling
The occasional lottery ticket or a small flutter at the weekend is not usually a problem. What lenders do not like to see is gambling all over your statements.
Things that can worry lenders include:
Regular deposits into betting apps
Large amounts being spent in a short period
Gambling that takes up a big chunk of your income
Gambling when you are already close to your limits
It raises questions about how stable your finances are and whether your income is being used to cover essential bills or risky behaviour.
If you know your statements show a lot of gambling, consider taking a break and letting things calm down before you apply. Some people use bank tools to block gambling transactions or set limits, which can also help you get back on track.
2. Payday loans and short term borrowing
Payday loans are a big red flag for mortgage lenders.
They can suggest that you are struggling to get through to the end of the month and rely on high interest, short term borrowing to plug the gap. Even if you have paid them back, recent payday loans can make a lender nervous.
If you have used this type of borrowing in the past, it is often better to let some time pass before you apply for a mortgage. Focus on building a small emergency buffer instead and keeping your spending stable.
You already have a helpful article on this topic, so it is worth linking to it in the content:
pay day loans and mortgage applications
3. Returned direct debits and missed payments
Everyone can make a mistake now and again, but repeated returned direct debits do not look good on a mortgage application.
On your bank statements, lenders do not want to see:
Direct debits being returned unpaid
Regular late payments
Bank charges for unpaid items
Important bills bouncing more than once
This suggests there is not enough room in your budget and that you may struggle to keep up with a mortgage payment.
If you know you have had issues in the past, work on getting everything running smoothly again. Make sure the key bills, like rent, utilities and credit commitments, are paid on time for several months in a row. If you are not sure how this looks, getting a full report from a service like Check My File and reviewing your bank statements can really help.
You can also link to: Why I always suggest using Check My File
4. Constant unauthorised overdrafts and charges
Using an arranged overdraft from time to time is common. What worries lenders is seeing you in an unarranged or maxed out overdraft all the time.
Warning signs for lenders include:
Going into an unauthorised overdraft on a regular basis
Overdraft charges every month
Your balance only going positive on payday before dropping again straight away
Spending that suggests you are relying on overdraft to cover essentials
This can make it look like your current commitments are already stretching you. A new mortgage payment on top of that may feel risky from a lender’s point of view.
If possible, try to bring your overdraft use down in the months before you apply. That might mean trimming back non essential spending for a while or using any spare cash to reduce the balance rather than add new costs.
How to tidy your bank statements before you apply
You do not have to live a perfect life to get a mortgage. Lenders understand that people have hobbies, social lives and one off expenses. The key thing is to show that your day to day money management is sensible and that the big red flags are not there.
Good habits in the three to six months before you apply can make a real difference:
Keep your bills and commitments up to date
Avoid new payday loans or short term borrowing
Reduce or pause gambling spending
Try not to go over your arranged overdraft limit
Keep cash deposits clear and easy to explain
If you are not sure where you stand, checking your credit file and looking closely at your recent statements is a good starting point. This ties in nicely with your existing article on improving your credit score: improve your credit score before a mortgage.
Talk to Ian before you apply
If you are worried about what your bank statements might look like to a lender, you are not on your own. Most people are not sure which bits matter and which bits are just normal life.
Ian can look at your situation as a whole, explain what different lenders are likely to think and help you put together a realistic plan. Sometimes a few small changes over a couple of months can make you a much stronger applicant.
If you would like some clear, straightforward guidance before you apply, you can get in touch through the website or call the office to arrange a chat about your next steps.
