What affects mortgage eligibility?

Are you eligible for a mortgage? And how much could you borrow? Check the factors that impact lenders’ willingness to give you a home loan. 

Are you eligible for a mortgage? And how much could you borrow? Check the factors that impact lenders’ willingness to give you a home loan. 

Mark Gordon
From the Mortgages team
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Posted 25 MAY 2021

What affects mortgage eligibility?

Each mortgage lender decides their own criteria for lending money. This means that while some lenders might turn you down, others may not. 

Generally, a lender will take into consideration: 

  • how much you want to borrow 
  • your deposit 
  • what kind of property you want to buy – it can be harder to find a lender willing to lend on high-rise flats, ex-local authority property, homes made from non-standard materials, properties above cafés and bars, listed properties and so on 
  • your employment status (the longer you’ve been in your job, the better) 
  • any debts you have 
  • your regular spending 
  • your credit rating 
  • whether the mortgage is affordable for you
  • what kind of property you want to buy – it can be harder to find a lender willing to lend on high-rise flats, ex-local authority property, homes made from non-standard materials, properties above cafés and bars, listed properties and so on
  • your employment status (the longer you’ve been in your job, the better)
  • any debts you have
  • your regular spending
  • your credit rating
  • whether the mortgage is affordable for you.

What do lenders look for when checking your eligibility for a mortgage? 

Before a lender will lend you money to buy a home, they want to make sure you can repay it. So they want to see if you’re responsible when it comes to paying debts, how much you can afford and whether you fit their other criteria, such as age and UK residency. 

Lenders will look at:

Your income – they 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 won’t be able to provide payslips and your income may fluctuate more than someone who is employed. You might be asked to produce accounts and the checks may be more rigorous. 

Your expenditure  – 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 a few months of bank statements to back up your figures. 

Future scenarios  – lenders will stress test how likely you are to be able to pay if 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. 

Can I get a mortgage?

Your ability to get a mortgage depends on a number of things, including the amount you're looking to borrow, the size of your deposit and your credit score. Some other things to consider include: 

  • your employment status and income 
  • your expenses 
  • your life stage 
  • dependants 

Before applying for a mortgage, it’s a good idea to work out your budget so you have an idea of how much you can afford to cover your deposit and monthly repayments, and still have enough money for any fees that come with the mortgage. 

It’s also a good idea to check your credit file before you apply to make sure it doesn’t contain any errors – even a small mistake like getting your date of birth wrong could affect your mortgage application. 

You can get free credit checks from each of the three credit reference agencies – Experian, Equifax and TransUnion.

What mortgage can I get?

There are several types of mortgage available, including fixed rate and variable rate mortgages. 

  • With fixed rate mortgages, the interest rate stays the same for a set period of time. 
  • With variable rate mortgages, the interest rate changes in line with the Bank of England base rate or the lender’s standard variable rate (SVR). 

The interest rate you’re offered will depend on factors including how much you want to borrow – and that depends on how much deposit you can put down – and your credit rating. 

Get an idea of much you could afford to borrow with our mortgage calculator.

The mortgage you can get also depends on whether you’re a first-time buyer, or whether you want to remortgage or find a loan for a buy-to-let property. 

We can help you compare mortgages from some of the market’s leading financial providers, to help you find a great mortgage rate. 

Compare mortgages

Or get in touch with our partners London & Country Mortgages Ltd (L&C)** mortgages and they’ll give you fee-free mortgage advice. 

Go to L&C mortgages

About London & Country Mortgages Ltd (L&C) 

**London & Country Mortgages Ltd (L&C) are a multi-award winning mortgage broker with over 20 years’ experience in helping people secure their perfect mortgage. Advice is provided by L&C, who are authorised and regulated by the Financial Conduct Authority (143002). 
L&C are not part of Compare the Market Limited. Compare the Market receive a % of the commission that our partner London & Country earns. All applications are subject to lending and eligibility criteria.L&C will not charge you a broker fee should you decide to proceed with a mortgage. 

Your home or property may be repossessed if you do not keep up with your mortgage repayments.

Can you get a mortgage if you are on benefits? 

Yes, just because you’re on benefits, it shouldn’t necessarily stop you from getting a mortgage. However, it might influence whether a lender will accept your application. Applications are reviewed on a case-by-case basis, because everyone’s situation is different. 
For example, whether your income is solely based on receiving benefits, or if it’s just an additional boost, could make a difference. Potential lenders will want to see which benefits make up how much of your income, and whether these are long-term, or even permanent, benefits you’ll receive. For example, a pension will be treated differently to universal credit. These rules and criteria can vary between lenders, so it’s a good idea to get advice on how this could affect you. That’s where our partners at London & Country Mortgages Ltd. can help you, who offer free mortgage advice. 

Go to L&C mortgages

Traditionally, mortgages are based on around four times your annual income. So, if this income is split between a salary and benefits, they’ll both be taken into account. For example, if you earn £22,000 from your salary, but then also receive £3,000 in benefits, your combined £25,000 earnings could see you eligible for a mortgage of £100,000. However, if your income is entirely, or the majority, benefits, this could mean you’re less likely to be accepted. 

What documents will I need to prove eligibility for a mortgage when I apply? 

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 are not 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 SA302 tax calculation and a tax year overview for up to four years. You may need to 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.

Just remember, 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:

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

What can I do if I am not eligible for a mortgage?

Here are some of the common reasons people get refused a mortgage: 
You have a poor credit history 

Like any loan or credit product application, mortgage lenders will run credit checks on you, to see how responsible you are with money. Managing your money well, by paying off debts, staying out of your overdraft, paying bills on time etc. will prove that you’re a reliable borrower, which will make you more likely to be accepted for a mortgage. Also, check your credit report for any errors, as correcting any could help improve your credit score. 
You have too much existing debt 

Whether this is that you have too many other existing mortgages, or you have difficulty with credit card debt or loans, lenders will want to see you can manage debt responsibly. If you’ve already proved that you can’t handle borrowing money, they won’t want to lend you tens or hundreds of thousands on top. Get back on top of your debt to prove you can look after your money. If your debt is hard to keep track of, a debt consolidation loan could help. 
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 only earn £30,000, don’t expect to be accepted. 
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

Mortgage lenders will want to see you’ve saved a decent enough deposit (usually 10%) before they offer you a mortgage. This is to reassure them that you’re responsible enough with money, and will be able to manage the repayments. Some lenders will accept deposits as low as 5%, or even 0%, but these are much rarer. So, save up what you can and aim for at least a 5% deposit. If you’re struggling to save a deposit, the government’s Help to Buy Scheme could help you. 
Managing or improving on these things can make a big difference to your chances of being accepted for a mortgage in future. Prove to lenders that you can handle the responsibility of borrowing the amount you’re asking for, and only apply for what you can realistically afford to repay. 
If you’d like an idea of how much you could borrow for a mortgage, check out our mortgage calculator

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