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What Do Lenders Assess when You Apply for a Mortgage? Let’s Find Out

Taking out a mortgage for buying property has become the standard for many of us. After all, not many of us can really afford to pay for property with cold, hard cash, can we? The best alternative, therefore, is to take out a mortgage which you can pay off over a number of years. But if you are thinking of applying for a mortgage, there are several considerations you should think carefully about – one of which is how likely it will be for a lender to accept your application. So what exactly do lenders check and assess when reviewing your application? Let’s find out.


Your earnings

The first aspect lenders will look at is your earnings – in other words, your income. They will look at your basic or standard income (the money you receive every month) as well as your other income or earnings, such as earnings from commissions, overtime pay, bonuses, and other jobs or freelancing work. Lenders will also look at potential income from investments and pensions, as well as income from ex-spouse financial support and child care or maintenance.

As proof of your income, it will be your responsibility to provide the lender with bank statements, pay slips, and the like. If, however, you are a self-employed individual, then you need to come up with accounts you use for your business, bank statements, and income tax payments.

Your expenses

Lenders will also check your outgoings or expenses. This will include expenses such as repayments on credit cards, other credit contracts or loans you have acquired, expenses on maintenance, your utility and Council Tax bills, and your insurance expenses, including building insurance, contents insurance, life insurance, travel insurance, etc.

Many lenders will also ask for specifics on other types of expenses, such as clothing expenses, recreation expenses, and the cost of caring for children, if you have any.

Any future change in interest rates, circumstances, and the like

Aside from checking your income and expenses, mortgage firms like confirm that lenders will also usually make an assessment based on future events or circumstances and see whether or not you will still be able to make your re-payments if there is an increase in interest rates, if you or your spouse/partner lose your job, if you become ill, or if you have a change in lifestyle (such as a change in your career or having a child).

Mortgage specialists like also recommend making sure you have enough savings to deal with changes – savings to cover three months’ of expenses should be a good start. Make sure you are protected from any future change so you don’t have to worry about fending for yourself and your loved ones (as well as making your mortgage payments) if your circumstances change.

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