Why do lenders need proof of income...

LizEstelle

HelpWhereIcan wrote:

If this was a valid argument, then investment companies would not have to use the warning that past performance is no indication of future performance when it comes to share based investments. Remember, the value of shares can go down as well as up - as can your ability to pay. That is why lenders look at liklihood. Which is why they want confirmation of income.

Indeed... and that is precisely what payslips are - an indicator of past performance in terms of ability to earn - not to pay.

HelpWhereIcan

LizEstelle wrote:

Very true - but where a lender COULD take cogniscence of previous payments history I see precious little reason why this should not be done.

i believe that both homer_j and I have explained that this is done when assessing your application - previous credit history is a factor in underwriting a mortgage.

LizEstelle wrote:

It is QUITE possible for a person to be in receipt of income which is legal, non-'dubious' ... and yet undocumented. In such a situation, getting a mortgage is a horror story.

Most 'legal, non-'dubious' ... and yet undocumented' can at least be explained ie tell the lender the source and allow them to check it. Does not mean that they have to accept it though. For example, some lenders will not take maintentnace into account, whereas others will accept proof in the form of bank statements showing it being regularly paid for the last 12 months. Other than that, cannot see what other income you may be referring to.

HelpWhereIcan

LizEstelle wrote:

Indeed... and that is precisely what payslips are - an indicator of past performance in terms of ability to earn - not to pay.

Believe my point was that it showed the likliehood of the income continuing. Again, all just part of them weighing up the risk of lending to you.

LizEstelle

HelpWhereIcan wrote:

i believe that both homer_j and I have explained that this is done when assessing your application - previous credit history is a factor in underwriting a mortgage.



Most 'legal, non-'dubious' ... and yet undocumented' can at least be explained ie tell the lender the source and allow them to check it. Does not mean that they have to accept it though. For example, some lenders will not take maintentnace into account, whereas others will accept proof in the form of bank statements showing it being regularly paid for the last 12 months. Other than that, cannot see what other income you may be referring to.

Ok, let's take a teensy, hypothetical example. I give a relative, say, £1000/month. Free, gratis, for nothing. No payslip involved. Totally undocumented. An impossible situation, according to you? Just couldn't exist, then?

madauri

Lenders will investigate your past performance and besides try to figure out whether you will able to pay back. Nobody can foresee the future though, so they have to rely on that information and trust they business instincts. They will never just trust the person, and that is common sense.

AndrewSmith

LizEstelle wrote:

Ok, let's take a teensy, hypothetical example. I give a relative, say, £1000/month. Free, gratis, for nothing. No payslip involved. Totally undocumented. An impossible situation, according to you? Just couldn't exist, then?

Yes it can happen however you won't get a mortgage based on that 'income'.

LizEstelle

AndrewSmith wrote:

Yes it can happen however you won't get a mortgage based on that 'income'.

QED

That was precisely my point. Indeed, you won't get a mortgage.

Payslips, payslips, payslips. Tra-la.

madauri

It could be worse. You could be a legal inmigrant and be forced to have your money in the bank without giving you a single penny of interest during more than a year because your passport is not British. Even with a steady address and a steady job and lots of payslips.

You're welcome to change the world.

LizEstelle

madauri wrote:

It could be worse. You could be a legal inmigrant and be forced to have your money in the bank without giving you a single penny of interest during more than a year because your passport is not British. Even with a steady address and a steady job and lots of payslips.

You're welcome to change the world.

And then again I could be a wheelchair-bound, accident victim, trying to hang on to the family home with financial help from my family... but then, talk like this would scarcely cut ice with the gorgeous folk of this world. I'm clearly a shady character. After all, I have no payslips.

tomstickland

A very odd thread, I must say. I'm sooooo curious to know what this mysterious income source is!
Basically, those lending the money are free to decide on what grounds they lend the money; if you don't like it then borrow the money from somewhere else.

If I was a mortgage lender and someone wanted to borrow a load of money and their income was some mysterious monthly gift then I'd regard that as a high risk since I'd have no idea whether the money would continue to arrive in the same manner. With proof of employment then I'd just accept the statistical risk of loss of income, based on past data.

If the OP was trying to hang onto the house with family help then the correct thing would be move the mortgage to the supplier of the family help.