Six Bank Statement Mistakes That Can Ruin a Home Loan Application

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Bank statements give lenders a glimpse into the lives of potential borrowers, but certain activities can lead to an unexpected denial of an application.

Suppliers are looking for clues that customers might have trouble keeping up with refunds in the future.

Here are the bank statement activities that brokers say acts as a red flag for lenders and, at worst, means claims get rejected.

1) Play habits

Bank statements detailing payments to bookmakers can instantly stop an app in its tracks, brokers warned, even when the borrower is an otherwise perfect candidate.

Malcolm Davidson, managing director of UK mortgage broker Moneyman, told us about a case where one of his clients had a perfect credit history, but a potential lender identified a gambling habit on bank statements.

Davidson said, “He was really the type of client that any lender would normally lend to. They were playing with their own money and there was no overdraft.

After asking for more information, the lender ultimately turned down the deal. Davidson said the client was indeed punished for his choice of vice.

Rachel Lummis of Xpress Mortgages admitted that gambling transactions were causing problems.

She said: “A lot of us like a float on the grand national – it won’t affect you – but if you have daily amounts going to companies, such as Bet Fair or Ladbrokes, it can cause a problem.”

2) be in the open

Tapping into overdrafts could suggest that a potential borrower is struggling to manage their money effectively, setting off alarm bells for lenders.

Lummis said: “A pretty common mistake is when a bank offers you this service to leave you overdrawn, but as long as you make the payment in the afternoon, you’re fine.

“It’s pretty generous of them and you play by the rules, but on your statement it will show those multiple trades as being over your overdraft.”

“It doesn’t matter if it’s sorted at the end of the day and accepted by your bank.

“Other lenders will see this as going over your overdraft limit and if you do it frequently, that’s enough to get your mortgage turned down. “

3) payday loans

Nick Morrey, technical product manager at John Charcol, said payday loans would pose problems for any traditional lender.

He added: “This implies that you cannot meet your monthly net income, so a large new mortgage liability could be a problem in the future.”

Bounced direct debits, when the account holder didn’t have enough funds in their account at the end of the month, is another stumbling block, Davidson advised.

4) Unexplained cash deposits

Regular payments from family and friends could be seen as a financial commitment and affect overall affordability, Morrey warned.

Borrowers will also need to have a reasonable explanation for any unusual or larger payments.

One-off cash payments can raise concerns among lenders about money laundering.

And those who give part of the deposits to borrowers will often need to provide proof of wealth, Davidson said.

5) jokes about bank statements

References to jokes to friends or family can cause problems, brokers say.

Lummis said: “A little light joke shouldn’t be played on your bank statements.

“A lender doesn’t want a friend to reimburse you for the meal you had last week, with a rude entry that says ‘payment for drugs’ or ‘sex last night’.”

6) Suggestive card payments

Davidson spoke of a case where the lender spotted a one-time payment to Mamas & Papas.

The lender then asked if the borrower was pregnant, which could affect her affordability in the long run.

One way for borrowers to keep bank statements from falling under the lender’s underwriting is to transfer the majority of expenses to a credit card before submitting an application, which is then paid off in full each month.

Switching some payments, such as gambling, to cash could also help facilitate claims.

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