What paperwork is needed to apply for a mortgage?

A stack of paperwork - a light-hearted look at what you might need to gather together to apply for a mortgage

As trusted mortgage advisers we have a requirement to fully understand our clients’ financial situation, which means we will need to see certain paperwork, and ask about the source of your funds.

At the time, it can feel like a lot, but the number of times we’ve helped clients identify spending issues that may impact the lender’s decision is surprising!

For example, do you really know how much you spend on food? One client thought it was around £400 – £600 but once we had added in the takeaways and mid-week top-ups, it was closer to £1200. Okay, that’s an extreme example but the point is that we get used to paying the bills and as long as we have enough every month the majority of us don’t keep a close check on what we’re actually spending.

Don’t panic, mortgage lenders don’t always go into this much detail, but we still need to know for our own calculations to be as accurate as possible for you.

In general, a mortgage lender is going to need the following paperwork

1. Proof of identification. In other words, a passport or driving licence. Ensure your driving licence is registered to the address you live at.

2. Payslips. We ask for the last four months, or 13 weeks if paid weekly. We may or may not need to send all of these to the lender, but it saves time by being prepared.

3. Bank statements. Generally, the trickier document to produce, because we ask for four months to cross reference with the payslips.

Many lenders offer online versions which are great but sometimes they aren’t in the required format. Ideally your statements will look like the old ones that you would have received in the post but if your bank does something different just let us know and we can help you with a suitable solution.

Occasionally, bank statements come as just a list of payments with no name, no account details, and no bank logo. We’re sorry to say, this it isn’t a sufficient piece of evidence for the lender, because although we know it came from you, the bank doesn’t.

Again, with online banking you would be surprised how many people haven’t updated their address!

How many accounts do you need? To be honest for us it’s a day-to-day account, and one for savings. But with so many new accounts now available that all offer the latest payment option we are seeing clients with as many as eight accounts. This really isn’t a problem but perhaps this is an opportunity to consider how many you really need.

Why do we need so many payslips and bank statements? Money laundering is rife within the mortgage industry and by reviewing payslips and bank statements we can help identify fraudulent applications from your genuine one. The modern fraudster is clever, and you’d be hard pressed to tell fake from real!

4. Credit card and store card statements. We’re seeing more and more people using credit cards to pay day-to-day expenses so it’s important to check for these payments.

Apps and Fintech companies like Klarna, PayPal, Google Pay, and GoCardless are all fairly new but again we just need to know about spending habits and source funds. If we don’t tell the lender, it can and does have an impact during the mortgage application process.

What else will you need disclose?

Proof of deposit. This may show up on your bank statements and be fairly obvious, but we do ask how you’ve saved the money. It may be from regular saving, or a previous house sale, inheritance, or a gift all of which are fine. We just need to know so that we can inform the lender and ensure that the information is consistent with the solicitor, who will also be required to check the source of funding.

Student loans. Yes, it can affect how much you could borrow.

Pension payments. Again, with some lenders pension payments are taken into consideration, but others ignore them.

Loans. Generally, the monthly amount will be taken into the affordability assessment unless it has less than six months left to run, in which case it may not affect the loan size that will be available to you.

Late payments. This is the biggest issue we see that could prevent you either getting the best mortgage rate or maybe even getting a mortgage full stop. Your credit profile is so valuable, but the score is only an indicator. You can have an okay score but still have a late payment. If in doubt get a copy of your credit profile from somewhere like Experian. It won’t harm your score to check it.

What happens to your paperwork?

Once we have your paperwork it’s reviewed by a member of the MK Mortgages team, who may ask some questions about payments if they aren’t clear. Then we’re in the best position to properly submit your mortgage application and get it through underwriting quickly. To do this we may send a cover note explaining why something has happened, or just to add some detail to the case to help the underwriter make a decision.

Many mortgage advisers take the bare minimum (even though they charge for their service) and then come back to you to ask for further information. Okay, it’s not a big deal, BUT with timescales and delays as they are with lenders, it can make for a slower process.

We recently had a situation where once the application was submitted it took 24 hrs to join the queue and then a further 10 days to be reviewed! If we interrupted that system by needing to submit further evidence, it would reset the whole process to the beginning.