What lenders actually check

The three keys, in the lender's order

Every mortgage decision resolves into the same three questions. This whole business is built on them.

1. Deposit. How much are you putting in, and where did it come from?
2. Income. How much will they count, and how stable is it?
3. Record. How have you handled money and credit until now?

Your credit file

There is no single credit score that lenders share. Experian, Equifax and TransUnion each hold their own data and lenders use different ones, which is why you can be declined by one bank and approved by another on the same day. Get all three before you apply - you are entitled to see them.

What is on there and what it means:

• Payment history on every credit account for six years. Recent misses matter far more than old ones.
• Defaults and CCJs for six years from registration. Satisfied is treated very differently from unsatisfied.
• Hard searches for twelve months. A cluster of them looks like distress.
• Total available credit. Not just what you owe - what you could draw. Several unused cards with big limits can count against you.
• Financial associations. A joint account links your file to somebody else's, and it stays linked until you formally disassociate.
• Electoral roll registration. Free to fix, and its absence makes you look harder to verify.

Your bank statements, line by line

This is the part people are not ready for. Underwriters typically read three to six months of statements for every account you use, and they are looking for patterns, not for a single transaction.

Income: what gets counted

Basic salary is counted in full. After that it varies enormously by lender, which is where advice earns its money.

• Overtime, bonus and commission. Anywhere from nothing to 100%, usually averaged over two years. If a big part of your income is variable, lender choice is critical.
• Second jobs. Often accepted where there is a track record, sometimes ignored entirely.
• Benefits. Child benefit, tax credits, universal credit and disability payments are counted by many lenders, in part or in full. Never assume they are not - it materially changes affordability for a lot of families.
• Pension income and investment income. Usually fine with evidence.
• Maintenance payments received. Often accepted where there is a court order or a consistent history.
• Self-employed profit. A subject of its own. See how each structure is assessed.

Commitments: what comes off

Affordability is not income times a number. Lenders deduct your ongoing commitments first, then apply the multiple, then run a stress test at a rate higher than the one you are being offered.

• Loan and car finance payments, at the contractual monthly amount.
• Credit card balances, usually assessed at 3% to 5% of the balance a month even if you clear it in full.
• Child maintenance and school fees.
• Dependants. Each child reduces what you can borrow, sometimes substantially.
• Committed regular spending such as travel and childcare.

Clearing a small loan before you apply can be worth several times its balance in extra borrowing. It is worth doing the arithmetic before you spend savings on it, though, because it also cuts your deposit.

The property is assessed too

You can be perfectly creditworthy and still be declined because of the building. Things that narrow the lender panel: flats above commercial premises, high-rise blocks, short leases under about 70 years remaining, non-standard construction such as concrete or timber frame, spray foam insulation in the loft, Japanese knotweed, and properties with an agricultural or holiday-use restriction. New builds also carry their own criteria. Tell us what you are buying early and we will check it before you spend money on a survey.