Can I get a mortgage?

What mortgage requirements do lenders set?

Before a mortgage lender will lend you money to buy a home, they want to make sure you can repay the loan. They’ll look at:

Your deposit
The bigger your deposit, the better your loan-to-value ratio (LTV) will be. LTV is the percentage of the property value you’ll need to borrow with your mortgage. So, a 20% deposit would create an 80% LTV, while a 10% deposit would create a 90% LTV. The lower the LTV, the more chance you have of being accepted for a mortgage.

Your income
Lenders usually want to see your most recent P60 and three to six months of recent payslips. Some lenders may also look at government benefits and child maintenance. If you’re self-employed, you’ll typically be asked for documents that show a steady income over the past year (preferably two or three years). Most lenders now accept HMRC’s SA302 form as verification of income.

Your monthly spending
You may be asked about outstanding loans, credit cards, household bills and insurance policies. Lenders will also want to know about other regular expenses, like child or spousal maintenance, school fees, childcare and travel to work costs. They may also ask you to estimate other living costs, like how much you spend on clothes and going out. You may need to provide bank statements to back up your figures.

Your credit score
Your credit score gives lenders an indication of how reliable a borrower you are. A high credit score will improve your chances of being accepted for a mortgage. It will also give you access to a better mortgage deal with a lower interest rate.

Your age
You must be over 18 to qualify for a UK mortgage. However, lenders may also have an upper age limit for mortgage acceptance. In most cases, they’ll expect you to pay off the entire mortgage before you turn 75.

Future scenarios 
Lenders will stress test how likely you are to make your mortgage repayments if your circumstances change – if interest rates rise, for example, or if you’re made redundant or have a baby. For example, a lender may “stress” their mortgage rate by 3% to see if it’s still affordable.

If you’re taking out a joint mortgage, lenders will look at the finances of everyone involved.

What documents will I need to prove mortgage eligibility?

Mortgage lenders will want to see proof of identity and your financial situation, both to comply with rules around the affordability of mortgages and money-laundering regulations. 

To prove your identity

You’ll need to show your prospective lender:

• Your passport
• Your driving licence
• A council tax bill
• Utility bills dated within three months – mobile phone bills aren’t acceptable
• Bank statements.

To prove your income

You’ll need to give the lender:

• Payslips from the past three to six months
• Your most recent P60
• Evidence of any bonuses or commission paid or due
• Bank statements from the past three to six months (these should be for the account your salary is paid into).

To prove your income from self-employment

You’ll need documentation as evidence of income:

• Two or more years of certified accounts (depending on the lender)
• Evidence from HMRC of your earnings in an SA302 tax calculation. You can use this statement to show up to four years of income tax. Check whether your lender will accept documents you’ve printed yourself
• If you’re a contractor, you’ll have to show proof of upcoming contracts
• If you’re a company director, you’ll have to provide evidence of dividend payments or retained profits.

Be aware that you can’t print your tax documents until 72 hours after you sent in your tax form. Allow time for this, if necessary.

To prove your expenditure

You’ll need:

• Three to six months’ worth of bank and credit card statements.

Why might I not be eligible for a mortgage?

Here are some of the common reasons people are refused a mortgage:

You have a poor credit history
Mortgage lenders will run credit checks to see how responsible you are with money. Late payments and multiple applications for credit over a short period are red flags that you’re having problems managing your finances.

If your credit history is less than perfect, give yourself around six months to build up your credit score. This will increase your chances of being accepted when you next apply for a mortgage.

You have too much existing debt
Credit cards and loans are marked on your credit report. If you have lots of both or are falling behind with the repayments, it could indicate you’re struggling with debt.

You don’t earn enough
Mortgage offers are normally capped at four times your annual salary. If you’re applying for a £300,000 mortgage but earn £30,000, don’t be surprised if your application is turned down.

You don’t have a reliable source of income
If you’re not consistently employed or you’re a self-employed worker whose earnings are inconsistent, lenders will see you as a greater risk. If they think there’s a higher chance of you being unable to reliably meet your repayments, they’ll refuse your application.

You don’t have enough for a deposit
You’ll need a decent deposit (usually 10%) before lenders will offer you a mortgage. Some will accept deposits as low as 5%, or even 0%, but these types of mortgages are hard to find.

If you want an idea of how much you could borrow for a mortgage, use our mortgage calculator.