What affects mortgage eligibility?

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

Daniel Evans
Mortgages expert
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Last Updated 1 MARCH 2022

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 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.

How to test if you meet mortgage requirements?

Before you get an official mortgage offer, you can apply for an ‘agreement in principle’. This can be useful, as it can test whether you’re likely to be eligible for a mortgage, and can give you an idea of which sorts of mortgage deals you could be approved for.

Some agreement in principle applications will require a hard credit check, which will leave a mark on your credit report that’s visible to other lenders. However, others may only require a soft credit check. If you’d prefer a soft credit check mortgage in principle application, you should check with the lender first.

Unfortunately, a mortgage agreement in principle isn’t a guarantee that you’ll receive an official mortgage offer. You’ll still need to go through the full mortgage application process when the time comes.

What types of 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.

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:

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

How much could I borrow for a mortgage?

As a general rule, the amount you could borrow for a mortgage is around four times your income. If you’re buying with a partner, this is four times you’re combined income. So, for example, if you earn £30,000 a year, you could borrow about £120,000. If you and a partner both earned £30,000, you could borrow £240,000.

However, this isn’t a fixed rule and different lenders could lend you more or less than this. It all depends on your financial situation. Mortgage lenders will look at your income, your deposit, existing debts, savings and even your spending habits.

To get a rough idea of how much you could borrow, use our mortgage calculator tool.

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.

Frequently asked questions

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.

How long will it take for my mortgage to be approved?

Timelines for mortgage applications vary, but it shouldn’t take longer than six weeks to get approval. To help speed things up, make sure you supply all the information and accompanying documents up front, to avoid any unnecessary back and forth between you and the lender.

Can I get a mortgage with a bad credit score?

Yes, while having a bad credit score can make getting a mortgage more difficult, you should still be able to apply for one successfully. However, you won’t be offered the best mortgages on the market, which are generally reserved for those with higher credit scores.

Bad credit mortgages may require a larger deposit, offer higher interest rates or restrict the amount you can borrow, so you may need to rethink the types of properties you’re looking to buy.

What should I do if my mortgage application is rejected?

If you’ve been declined a mortgage, don’t panic. Just because you’ve been rejected by one lender, doesn’t mean you’ll be rejected by all. Here are some things you should consider after your mortgage application is rejected:

  • Don’t immediately apply with another lender. Repeated rejections can have a seriously negative effect on your credit score This will only make future applications more difficult.
  • Ask the lender why they rejected your application. They’re not obligated to tell you, but it could provide you with the information you need to improve your chances next time.
  • Check your credit score. With the meerkat app, you can check your credit score for free. A bad credit score could explain why your mortgage application was rejected.
  • Take the time to fix any issues with your application. If your credit score was too low, try building your credit score to improve your chances of approval next time.

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