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What affects mortgage eligibility?

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.

Tobi Owens
From the Mortgages team
minute read
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Posted 27 FEBRUARY 2020

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, UK residency and so on.

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 widely than someone who is employed. So you may 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 such as child or spousal maintenance, school fees, childcare and travel to work costs. They may also ask you to estimate other living costs, such as how much you spend on clothes and entertainment. 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% and 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 factors, including the amount you're looking to borrow, the size of your deposit and your credit. Some additional factors to consider include:

  • your employment status and income
  • your expenses
  • your life stage
  • dependants
  • your credit rating
  • any existing debt

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 associated fees.

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 checks from each of the three credit reference agencies – Experian, Equifax and TransUnion (formerly Callcredit).

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

Mortgage lenders will expect applicants to provide proof of identity and 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.

Get advice from London and Country

If you're ready to continue your mortgage journey, please contact out trusted mortgage partner London & Country Mortgages Ltd for advice on a comprehensive range of mortgages from across the market.

Who are London & Country Mortgages Ltd?

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 BGL Group Limited, of which Compare the Market forms part. Compare the Market may receive an introducer’s fee from L&C for customers who use this service. 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.

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