What Do Mortgage Lenders Look For? The Complete Guide

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Securing a mortgage can seem daunting, but understanding what lenders are looking for can help to simplify the process. In this post, we’ll unpack important factors like credit scores, income stability, and debt-to-income ratio while offering tips to enhance your approval chances. Whether you’re a first-time homebuyer, considering refinancing, or just curious, this guide aims to equip you with the knowledge to navigate the mortgage process confidently.

Let’s dive in and understand the essentials of mortgage lending.

Man signing form in front of mortgage lender

1- Recent Applications

When mortgage lenders assess your financial health, one critical area they focus on is your recent credit applications. If you’ve applied for multiple lines of credit quickly, it can be a red flag for lenders. Potentially, this can indicate that you’re experiencing financial instability or have done in the past. Either makes you a riskier prospect for making your monthly mortgage payments on time.

Before you begin the mortgage approval process, we’d recommend limiting other credit applications. This reduces the number of recent inquiries on your credit report and presents a more stable financial picture to potential lenders or mortgage brokers if they’re helping you to secure your mortgage.

2- Payment History

A significant factor in a lender’s decision-making process is your payment history. If you’ve consistently made your payments on time across various debts, it demonstrates to lenders that you’re financially responsible and reliable. However, a history of late or missed payments can paint an unfavourable picture. If you’ve had issues with timely payments in the past, it becomes crucial to demonstrate an improved pattern of consistent, on-time payments moving forward. Long-term, this can be a major factor in helping you to get approved for a mortgage.

3- Credit History

Another key element that your mortgage lender will review is your credit history, which includes the length of your credit, the types of credit you have, and how you’ve managed it over time. A long and diverse credit history—such as credit cards and student loans managed responsibly- indicates your ability to handle debt. This can be particularly beneficial when applying for a mortgage. Conversely, a short credit history or one that shows poor management of different credit types can pose difficulties.

If you’re interested in monitoring your credit report, we recommend looking at the app ClearScore. Not only does this give you monthly updates on your credit score, but it also gives you tips on how you can improve it. These can range from registering to be on the electoral roll to paying off debt on time each month. Visit ClearScore for more information!

4- Major Derogatories (e.g. Bankruptcies)

Major derogatory items, like bankruptcies, can severely impact your perceived creditworthiness. While they don’t automatically disqualify you, they make the lending process more challenging and will likely require you to provide additional documentation and further explanation.

Over time, and with improved financial habits, the negative impact of these derogatories decreases. You’ll just need to demonstrate responsible credit use after these events to aid in rebuilding your credit profile.

5- Being an Authorised User

Being an authorised user of another person’s credit account can impact your credit score positively and negatively, depending on how well the account is managed. If payments on that account are always on time and the balance is kept low, it can benefit your credit score. However, if the main account holder mismanages the account, it could also harm your credit.

Lenders take this into account because it can show your experience with managing credit, but they’ll also want to analyse how much it’s affecting your overall credit situation. This is why it’s important to consider who you’re sharing an account with and have important financial conversations about money management and mortgage repayments beforehand.

6- Size of Deposit

The size of your deposit or down payment is critical when applying for a mortgage. Did you know that a larger down payment reduces the lender’s risk and could afford you more favourable loan terms? Not only does this demonstrate your commitment to the purchase, but it also shows your ability to save and manage large amounts of money. A larger deposit could even counterbalance other less favourable aspects of your application, such as a lower credit score or higher debt-to-income ratio.

7- Debt To Income Ratio

Lastly, lenders look hard at your debt-to-income (DTI) ratio. This measures how much your monthly income is dedicated to servicing your debt. A high DTI ratio might suggest that you have more debt than you can comfortably manage on your current income, making you a riskier prospect to lenders. Striving for a low DTI ratio—by reducing debt or increasing income—can make you a more attractive candidate for a mortgage.

How do lenders assess your income?

How Do Lenders Assess Your Income?

Overall, the above-mentioned factors are how lenders assess your mortgage loan income. They’ll determine your income by examining several aspects, such as the amount you earn through bank statements, the stability of your income, and your debt-to-income ratio. Essentially, these are how mortgage lenders check you’re a reliable borrower.

Various documents will be needed during the application process to verify your income and ensure it’s sufficient and dependable enough to meet your mortgage obligations. This comprehensive assessment allows lenders to make an informed decision about your ability to repay the loan, reducing the risk of default. Remember that each lender may have different criteria and standards, so understanding these factors and being prepared can greatly enhance your chances of securing a mortgage loan.

Related: Do Mortgage Brokers Use Gross or Net Income?

Do Mortgage Lenders Consider Your Assets?

Yes, assets, such as savings, stocks, bonds, real estate, or even retirement accounts, are a testament to your financial health and can significantly enhance your borrowing appeal. If you have a large amount of assets, you can put down a larger down payment, reduce the lender’s risk, and potentially get more favourable loan terms.

Not only can these assets help cover payments in the event of any unexpected financial hiccups, but this also helps further demonstrate your reliability as a borrower.

What do lenders require for a down payment?

What Do Lenders Require for a Down Payment?

In the UK, as a general rule of thumb, mortgage lenders typically require a minimum down payment, or deposit, of around 5% to 20% of the property’s value. However, it’s worth noting that the exact percentage can vary between providers.

Expert Mortgage Brokers: Helping You To Secure the Mortgage You Deserve

Applying for a mortgage doesn’t have to be a stressful experience. With the right planning, you can navigate this process with confidence and success. As specialist mortgage brokers with years of experience, we’re here to support you every step of the way. We simplify the process, ensuring you understand the requirements and feel confident about your financial decisions.

Having the right advice and guidance from a mortgage broker can make all the difference. We understand the ins and outs of the mortgage application process and are dedicated to helping you find a solution tailored to your needs. Remember, the road to homeownership begins with a single step. Understanding what mortgage lenders look for can ensure that the step is in the right direction. With this knowledge, you can then approach the mortgage process ready to showcase your financial health and stability, increasing your chances of securing the home loan you deserve.

Get in touch with us today for more information!


Related: The Different Types of Mortgage Lenders | Do Mortgage Lenders Do Final Checks Before Completion?


Mortgage Lending FAQs:

We’ve answered some of the most frequently asked questions about mortgage lenders below:

Yes, mortgage lenders often look at your spending habits to better understand your financial management. This doesn’t necessarily mean they’re going through every transaction but are generally interested in big expenses and recurrent payments. They’ll want to ensure you’re not spending recklessly or have high levels of debt, which could impact your ability to make mortgage payments.

Mortgage lenders typically ask to see several documents during the application process. These may include proof of income, bank statements, credit history and identification.

When considering your financial history, mortgage lenders typically look back at the past two to three years on a bank statement. For credit history, they may view information from the past six years, as this is the maximum period for which personal credit information is held on your credit report.

When you apply for a mortgage, lenders typically request to see your bank statements, usually for the last three to six months. This allows them to check your income and examine your spending habits. It also helps them understand if you have existing financial commitments that may affect the monthly mortgage payment. While lenders can’t access your account directly or without your permission, providing them with bank statements is a standard part of the mortgage application process.

Mark Jones - Specialist Mortgage Lender



Richard Young - Expert in lifetime mortgage and later life lending options.



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Jones & Young are professional mortgage lenders, delivering industry-leading mortgages to first-time buyers, self-employed and CIS customers for over 10 years.

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