When a lender requests bank statements, what are they looking for?

QTPie

We have just applied for a mortgage with Britannia.

We have a 60% deposit and are looking to borrow 3x our joint salary. We have our own business with 10 years of accounts and very healthy profits and turnover etc. No adverse credit history or hire purchase agreements or anything like that. Both of us have excellent credit scoring.

The mortgage valuation has happened on the property and that was fine.

Had a call from Britannia this morning and they questioned the fact that husband and I had two late payments on our credit cards (one each). I explained that it was because we had just had a child: nothing to do with the finances, just that we had both completely forgotten to pay a credit card each (doh!!! ). VERY rare! Just happened to happen this year .

Britannia then requested the past 3 months (each) of our current account statements. We have faxed those straight off.

My question is, what are Britannia looking for in our statements? Both of our current accounts are "erratic" (since we don't have a fixed salary) and I have had quite a lot of money going in and out this past few months (large gifts of money for my son - into my account and then out into investments accounts - etc). Probably looks like money laundering! I also tend to dip into my authorised overdraft (I have a £700 authorised overdraft - may go into that by up to £100, but as soon as I see it I transfer money in to cover it).

I am guessing that the account isn't what they normally see... nothing technically wrong with it (no unauthorised - or even large authorised - overdraft), but definitely not routine. Husband's is similar (although not quite such large amounts in and out). Are we likely to have problems?

QT

frankw5

To be honest most lenders are getting very strict now on what needs to be seen. Where I sued to work, every person that was self employed had to provide 3 years accounts, no exceptions. Not even if they are already with us, had been for 10 years etc.They seem to be just being careful I do not think it is anything to worry about.

LillythePink

I know that when we went to our mortgage broker in april with our bank statements, he was looking for regular (possibly large) amounts which could be loan/cc payments etc - we were declaring them and saying that they were going to be paid off (and they were and we had to provide proof of this), but he did mention that they were looking for anything else unusual which could be a loan etc which wasn't declared. The only other unusual amount I had going out of my account was to my child minder.

QTPie

Yes, we have already submitted 3 years of accounts (they already had all of that). The mortgage advisor seemed surprised that head office required more - as far as he was concerned, everything was tip top...

Hhhhm, definitely quite a few big payments in and out.... My credit card has been about £700/£1000 a month (paid off in full), husbands is similar or sometimes larger (he sometimes puts expenses through it). Plus a whopping £11k in savings for my son through the account and almost £4k payout from health insurance.... My account has pretty high throughput.... Husband had a couple of business class tickets to the US go through his credit card. None of it a problem (we are living well within our means), but it probably doesn't look good!

I worry that mortgage applications get checked in a very formulaic way (by people with little lateral thinking) and that our statements may blow their minds...

QT

Thrugelmir

QTPie wrote: »

I worry that mortgage applications get checked in a very formulaic way (by people with little lateral thinking) and that our statements may blow their minds...

QT

What'll they will determine is how you manage your finances bearing in mine your erratic income.

Dealing with finance developes a 6th sense instinct as to when things aren't what they first seem......

opinions4u

Ok, the credit cards have set the warning bells jangling and they want to know everything about how your run your finances.

Here's what I used to look for:

1) Bank charges - can you operate your finances within the T&Cs of the account?

2) Increasing overdraft in recent months - checking the balance prior to pay days and seeing if it is higher than the previous pay day (checking that you are not spending more than you earn)

3) Cross-referencing your bank statement to the credit report AND the mortgage application form - did you tell the truth on income and outgoings?

4) Is there any undisclosed credit (e.g. did you forget that interest free loan for the suite, or deliberately fail to disclose that £250pm car finance)? - this could give an excuse to decline the mortgage or reduce the amount offered.

5) Are there any strange credits or debits (your erratic items may cause concern and generate more questions)?

6) Looking to ensure that the new mortgage (and possibly different household bills) were affordable given current spending.

There were probably one or two other things which have slipped my mind, but seeing bank statements usually gave me a "gut feeling" for the way a customer managed his or her finances.

I hope that helps!

QTPie

Thrugelmir wrote: »

What'll they will determine is how you manage your finances bearing in mine your erratic income.

Dealing with finance developes a 6th sense instinct as to when things aren't what they first seem......

"Available income" is not erratic at all, but the amount that we pay ourselves (and, recently, income from additional sources) is erratic - if that makes sense? We take what we need from the company (which is quite considerably less than the profit - obviously we stay well within our means) rather than paying ourselves a fixed amount each month.

The company accounts could demonstrate a very healthy and steadily building cashflow. My husband is risk adverse - the company is (and always has been) run for steady, good, maintained income. There has been some growth, but not a lot: his focus has always been maintaining a good profit and cashflow, rather than anything riskier (which could potentially have more reward, but could also cause more problems...).

Nothing sinister is our finances at all: we earn a very reasonable amount and we spend a very reasonable amount WHILST MAINTAINING a very healthy cash rich company. It just looks a bit bizzare if you look at our bank statements (i.e. big irregular sums in and out).

QT

QTPie

opinions4u wrote: »

1) Bank charges - can you operate your finances within the T&Cs of the account?

No bank charges - ALWAYS well within our account Ts & Cs

opinions4u wrote: »

2) Increasing overdraft in recent months - checking the balance prior to pay days and seeing if it is higher than the previous pay day (checking that you are not spending more than you earn)

No, I don't think so.

opinions4u wrote: »

3) Cross-referencing your bank statement to the credit report AND the mortgage application form - did you tell the truth on income and outgoings?

4) Is there any undisclosed credit (e.g. did you forget that interest free loan for the suite, or deliberately fail to disclose that £250pm car finance)? - this could give an excuse to decline the mortgage or reduce the amount offered.

Didn't claim an income - income was through assigned profit against shares in company (which makes sense): this was worked out by the mortgage advisor.

No undisclosed credit (no car agreements - we both own our cars outright - no hire purchase agreements). Outgoings not asked about.

opinions4u wrote: »

5) Are there any strange credits or debits (your erratic items may cause concern and generate more questions)?

Possibly - £11k through my account as "cash gifts" for my new son (cash/cheques into my account, then out to various investments for him). Almost £4k medical insurance payout.

opinions4u wrote: »

6) Looking to ensure that the new mortgage (and possibly different household bills) were affordable given current spending.

Mortgage £200 a month more expensive than current rent - not a problem because "income into bank account" (from company) can be easily increased to cover that.

I guess that the problem is that our "actual net income" is greater than "the income we pay ourselves into our bank accounts" (the rest just accumulates in the company bank accounts...).

opinions4u wrote: »

There were probably one or two other things which have slipped my mind, but seeing bank statements usually gave me a "gut feeling" for the way a customer managed his or her finances.

Yes, it looks erratic... . It isn't.... we know how much we have coming in (profit to the company) and we spend (and pass on to our current accounts) accordingly (but conservatively). It is just that our current accounts don't exactly tell all of the story...

If they don't like what they see, is there any appeal? Can we refer them to our Accountant, our bank manager or use a Guarantor (sp?).

QT

jockosjungle

You might be worrying too much. They wanted to see my payslips because I have a job, you probably don't have payslips so they want to see some evidence that you are being paid what you say you are being paid

R

Pincher

Applying for a mortgage is like Dickensian marriage: they only want virgins from a good family. I'm sure you want a husband with "good prospects". If only you can inspect his bank account before you accept the proposal.