What Do Mortgage Lenders Look For on Your Bank Statements?

When you apply for a mortgage, lenders don't just look at your income and credit score; they dig into your bank statements. They use these documents to build a detailed picture of your financial habits (typically the past 3 to 6 months) and confirm you can comfortably afford the mortgage.

This is a crucial step in the mortgage application process, and certain transactions or risky financial behaviours can cause an underwriter to decline your application.

What lenders look for on your bank statements

Lenders scrutinise your bank statements to build a picture of your financial habits and assess your ability to manage your money. They look for both positive signs and potential red flags.

Here are the key things that can cause an underwriter to decline your application:

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  Online Gambling

While a casual bet might seem harmless, regular or significant payments to online gambling websites are a major red flag for lenders.

They see gambling as a risky behaviour and may view applicants who engage in it as less financially stable and more likely to default on their mortgage.

The UK online gambling market was valued at £4.4 billion in 2024, according to the Gambling Commission. Regardless of how much you win or lose, these transactions will be picked up during the underwriting process.

Lenders are concerned about how this habit could impact your ability to meet your mortgage payments if your luck changes.

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  Overdrafts

Regularly using your overdraft, whether it's authorised or not, can signal to a lender that you are struggling to manage your finances.

A consistently used overdraft suggests you rely on it to cover your monthly expenses, which raises concerns about your ability to handle mortgage repayments.

An unauthorised overdraft, where you've exceeded your agreed limit, is an even bigger red flag. Lenders see this as a sign of poor financial control and a higher risk of default.

You should aim only to use your overdraft for emergencies and clear it promptly each month.

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  Payday Loans

Mortgage lenders view payday loans as a clear sign of financial mismanagement. These loans, which often have extremely high interest rates, suggest that you may be unable to manage your finances without resorting to high-cost borrowing.

Even if you've repaid the loan, the fact that you needed to use this type of credit can severely impact your chances of getting approved for a mortgage.

Other red flags and warning signs

• Untraceable Cash Deposits: Large amounts of cash appearing in your account without a clear source will raise questions for lenders. They need to verify that all funds, especially those for your deposit, are from a legitimate source as part of anti-money laundering checks.
• Returned Direct Debits or Bounced Payments: These are a clear sign that you do not have enough funds to cover your regular outgoings. A single bounced payment can be a concern, while multiple occurrences will be a major red flag, suggesting poor financial management.
• Large or Unusual Transactions: Be prepared to explain any deposits or withdrawals that are out of your ordinary spending pattern. This includes transferring large sums to friends or family. Lenders will want to understand where your money is going and if it is being used for undisclosed debts..

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Positive signs lenders look for

Lenders are not just looking for things to decline your application. They are also looking for positive signs that show you are a responsible and low-risk borrower. Your bank statements should demonstrate:

• Consistent Income: Regular and consistent deposits from your employer or clients prove the income you declared in your application is accurate and stable.
• Regular Savings: Showing a habit of putting money aside each month indicates financial discipline and proves you can live within your means while still building your savings.
• Responsible Spending: Your spending habits should show that you are in control of your finances. This means no excessive spending or large withdrawals that would make a lender question your ability to manage a mortgage.

How to prepare your finances for a mortgage application

If you're concerned about past issues on your bank statements, don't lose hope. Here is a clear plan of action you can take to improve your financial position and demonstrate to a lender that you are a reliable borrower.

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  Create a clean financial history

The most important step you can take is to stop the problematic financial behaviours immediately. This includes stopping all gambling, clearing and staying out of your overdraft, and avoiding any form of high-cost credit like payday loans.

Lenders will typically review your bank statements for the last 3 to 6 months. A clean financial history in this period demonstrates responsible financial management.

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  Check your credit report

Lenders will also review your credit report to assess your financial health. You should regularly check your report for free with services like Experian or ClearScore to identify any inaccuracies or negative marks that could affect your mortgage eligibility. Making sure your credit report is accurate will prevent any surprises later in the process.

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  Manage your Social Media presence

In today's digital age, what you post online can impact your mortgage application. Lenders may use social media to verify the information you provide.

You should ensure there are no inconsistencies between your application and your online profiles, especially concerning your employment history, relationship status, or property intentions.