When applying for a mortgage or moving home, your bank statement might hold clues that could raise concerns with lenders. Mortgage advisor Angela Little, known for her insights as “A Little Mortgage Advice” on social media, recently shared some important “red flags” that banks typically do not like to see on your statement. These could impact your ability to secure a loan, and many people are unaware of just how crucial these details can be.
Mismatched Payslip and Bank Deposits
One of the most common and overlooked red flags is when the net pay on your payslip doesn’t match the amount that gets deposited into your bank account. According to Little, this mismatch can be a big issue for lenders. While it might not always happen, it’s crucial that the numbers align to avoid raising any red flags.
- Why it matters: A discrepancy between your payslip and your bank deposit could suggest irregularities or potential financial instability, which lenders see as a risk.
- Solution: Double-check that your payslip and bank statement match up and keep records in case of errors.
Unexplained Large Deposits
Banks also tend to scrutinize large, unexplained deposits that appear on your statement. If you’ve received a lump sum of money without clear documentation or explanation, this could be a cause for concern. Lenders may question where the money came from and whether it’s legitimate or sustainable.
- Tip: If you’ve received a gift or windfall, be sure to document it properly with clear explanations in case lenders request clarification.
High-Risk Spending Habits
While regular spending is expected, certain patterns can raise eyebrows with lenders. Frequent gambling transactions, high credit card debt payments, or consistent overdraft usage might signal risky financial behavior, which banks tend to view negatively when assessing your mortgage application.
- Advice: Limit risky financial behaviors during the months leading up to your mortgage application, and avoid maxing out credit cards or frequently dipping into your overdraft.
Regular Payments to Non-Essential Subscriptions
Regular payments to non-essential subscriptions or services can also be a red flag. Excessive spending on subscriptions for luxury services or entertainment might give lenders the impression that your financial priorities are out of balance.
- What to do: Before applying for a mortgage, review your subscriptions and cancel any that may seem frivolous or unnecessary to avoid impacting your application.
Borrowing from Unregulated Lenders
Lenders tend to take a cautious approach when they see evidence of borrowing from unregulated lenders or payday loan companies on your statement. This can indicate financial distress or a history of relying on high-interest loans to make ends meet, which could be seen as a liability.
- Avoid: Steer clear of payday loans or unregulated borrowing before applying for a mortgage, as these transactions are typically frowned upon by traditional banks.
