Ltd Co director - what will underwriters be looking for in bank statements?

stek2008

Hi folks,

I'm being a little paranoid while waiting for a mortgage decision.

I'm a limited company director drawing most of my income from that company. 
As part of the underwriting process, Natwest is asking for 3 months personal, 3 months business bank statements + a copy of the last 2 years accounts. Accounts show a healthy profit above my own income from the business. 

My paranoia comes from the time of year - the 3 months they'll see on the business accounts are the ridiculously quiet Christmas/New Year period where the business runs on fumes. Neither the business nor my personal account ever goes overdrawn but it's very much money in and straight out until things normalise in February and my clients' accounts departments wake up. 

I'm assuming the reason for asking for the 2 years accounts as well as the statements is to factor in oddities such as this (income spread with peaks and troughs through the year) but is it likely to be more of a worry for an underwriter? My other half suggested sending them a whole year's worth of bank statements proactively but not sure giving them more than they ask for will be well received either...

Any thoughts or reassurances to stop worrying about it?

Thanks,
Steve

[Deleted User]

Natwest do seem to be now applying an element of common sense to their S.E underwriting that has been missing for the last near 2 years.  
Up to now they would be looking at the credits from the business to make sure it adds up to the profit.  Real basic and silly assessment.  Now they will just be looking for clear signs of pressure to confirm if a business is struggling.  This would perhaps be more relevant for a business with lots of employee costs and expenses and it might be obvious that the business is burning through cash reserves with no income.   They would then look at the accounts and see if that story matched up on paper.  So if the business had more expenses last year than income obviously thats going to decline.   If it didnt then they may ask a question to figure out why the statements dont match the accounts.   
This would be for complicated company structures.   If its just yourself there I wouldnt be expecting too much of a drilling beyond ensuring you are solvent.  

They might also be looking for bounceback loans that have artifically inflated the business assets as another example.   I had a client who came to me boasting of his healthy balance in his company when 95% of it was from a bounceback loan.

If they ask for more information you can volunteer that your business income mainly comes through at certain times of year.   If they ask for proof of this then you can provide statements covering a wide period.  

Personally I never offer more to the underwriter than they ask for as then you are inviting questions about things that were previously not relevant.  
I dont tend to have many issues with SE cases anymore.  Most lenders have figured out if they want to do business in that area by now and have half decent processes in place

stek2008

Deleted_User said:

Natwest do seem to be now applying an element of common sense to their S.E underwriting that has been missing for the last near 2 years.  

Thanks Deleted_User,

That's reassuring.
My accountant isn't cooking the books in any exceptional ways just some months clients pay up, others they drag their feet.

Annoyingly I have a second job on Payroll which would likely go a long way (alongside the other half's full-time earnings) to cover the income requirements but apparently, as it only started in October they'll ignore it completely. 

I shall try to rein in the panicking at least until they give me a good reason.

Steve

ACG

IF this becomes a problem, I think with an explanation you should be fine. 
I dont know what you do (you may have said but I only skim read), but it could be obvious from your business that this is a quiet period. If your a gardener for instance, winter is going to be quiet. If you are Santa actor, December is going to be pretty busy. 

stek2008

ACG said:

IF this becomes a problem, I think with an explanation you should be fine. 
I dont know what you do (you may have said but I only skim read), but it could be obvious from your business that this is a quiet period. If your a gardener for instance, winter is going to be quiet. If you are Santa actor, December is going to be pretty busy. 

Haha, maybe I should be a Santa actor during December actually...

I'm a software developer so my work is often 3-12 month projects with a large down-payment, then often limited income for 3-4 months before another large instalment at the end. The trend is relatively obvious looking at 1 year+ of business statements but the last 3 months will look like a low level of income. Ironically next month's statements will look much happier, but the hope is that Natwest's underwriting queue isn't that long... As I say the statements always reflect a positive balance - just some months I might not draw a full salary/dividend then others I'll take more to balance it all out. 

The last time I had a mortgage (pre-divorce) the lender just looked at accounts + a letter from the accountant advising he knew of no material change in earnings so being extra paranoid perhaps. 

ACG

Pre covid, accounts/SA302 would have been fine. 
Now though, they want to ensure your business is back to normal. I imagine there are some businesses still struggling post covid and some are potentially back to normal but carrying a lot more debt than the pre-covid days. 

I think with an explanation you may be fine, it could be worth just giving your broker or if applying direct sending in 4 months business bank statements and just providing an explanation of how your income works. 

stek2008

ACG said:

Pre covid, accounts/SA302 would have been fine. 
Now though, they want to ensure your business is back to normal. I imagine there are some businesses still struggling post covid and some are potentially back to normal but carrying a lot more debt than the pre-covid days. 

I think with an explanation you may be fine, it could be worth just giving your broker or if applying direct sending in 4 months business bank statements and just providing an explanation of how your income works. 

Strangely so far the business statements haven't been requested (just SA302s and final company accounts) - it may be the request will come later I guess.

Thanks for all the advice so far.

Steve

Thrugelmir

stek2008 said:

ACG said:

Pre covid, accounts/SA302 would have been fine. 
Now though, they want to ensure your business is back to normal. I imagine there are some businesses still struggling post covid and some are potentially back to normal but carrying a lot more debt than the pre-covid days. 

I think with an explanation you may be fine, it could be worth just giving your broker or if applying direct sending in 4 months business bank statements and just providing an explanation of how your income works. 

Strangely so far the business statements haven't been requested (just SA302s and final company accounts) - it may be the request will come later I guess.

If an external accountant has prepared your accounts then there's little that the underwriters will determine from bank account transactions. In isolation pretty meaningless data. 

stek2008

Thrugelmir said:

stek2008 said:

ACG said:

Pre covid, accounts/SA302 would have been fine. 
Now though, they want to ensure your business is back to normal. I imagine there are some businesses still struggling post covid and some are potentially back to normal but carrying a lot more debt than the pre-covid days. 

I think with an explanation you may be fine, it could be worth just giving your broker or if applying direct sending in 4 months business bank statements and just providing an explanation of how your income works. 

Strangely so far the business statements haven't been requested (just SA302s and final company accounts) - it may be the request will come later I guess.

If an external accountant has prepared your accounts then there's little that the underwriters will determine from bank account transactions. In isolation pretty meaningless data. 

Good point - just surprised as Natwest list 3 months business statements as a requirement on their packaging guidance for Ltd Co. directors.
When the underwriters get to it, I suspect they may ask for them later. 

Thrugelmir

stek2008 said:

Thrugelmir said:

stek2008 said:

ACG said:

Pre covid, accounts/SA302 would have been fine. 
Now though, they want to ensure your business is back to normal. I imagine there are some businesses still struggling post covid and some are potentially back to normal but carrying a lot more debt than the pre-covid days. 

I think with an explanation you may be fine, it could be worth just giving your broker or if applying direct sending in 4 months business bank statements and just providing an explanation of how your income works. 

Strangely so far the business statements haven't been requested (just SA302s and final company accounts) - it may be the request will come later I guess.

If an external accountant has prepared your accounts then there's little that the underwriters will determine from bank account transactions. In isolation pretty meaningless data. 

Good point - just surprised as Natwest list 3 months business statements as a requirement on their packaging guidance for Ltd Co. directors.
When the underwriters get to it, I suspect they may ask for them later. 

Circumstances differ widely. Rather than becoming overly concerned, jump when you actually reach a fence not before. When people do express undue concern or a reluctance to co-operate freely underwriters naturally will wonder why. 

stek2008

Circumstances differ widely. Rather than becoming overly concerned, jump when you actually reach a fence not before. When people do express undue concern or a reluctance to co-operate freely underwriters naturally will wonder why. 

Good advice - thank you