Mortgage eligibility - what do lenders look for?
Key takeaways
Lenders consider your income, outgoings, deposit, credit history, employment status and the property you want to buy.
Your monthly spending can affect how much you’re able to borrow, even if you have a high income.
An agreement in principle can give you an indication of how much you may be able to borrow, but it isn’t a guarantee of a mortgage.
Having a poor credit history doesn’t necessarily prevent you from getting a mortgage, although it can limit your options.
What affects my eligibility for a mortgage?
Mortgage lenders have their own criteria when deciding whether to lend. This means being rejected by one lender doesn’t necessarily mean you won’t qualify with another.
Generally, a lender will be looking at:
The size of the loan you want to take out
How much you’ve saved as a deposit
The type of property you want to buy (certain properties, such as flats above cafes and bars, are deemed riskier to lenders)
Your employment status (the longer you’ve been in your job, the better)
Your credit history
Your affordability
How do mortgage lenders assess affordability?
Lenders need to be confident that you can afford your mortgage repayments, both now and in the future. They’ll look at your income alongside your regular spending and existing financial commitments:
Your income
If you’re employed, you’ll typically need to provide three to six months’ worth of payslips.
Some lenders may also consider other income, such as certain benefits or child maintenance.
If you’re self-employed, you’ll generally need to provide evidence of your income through documents such as certified accounts, SA302 forms or tax year overviews.
Monthly outgoings
Your monthly outgoings can have a significant impact on how much you’re able to borrow.
Lenders don’t just look at your salary, they assess how much of your income is already committed to regular expenses and debt repayments.
They may look at costs including:
Household bills and utilities
Council tax
Rent or existing mortgage payments
Credit card and loan repayments
Car finance
Childcare and school fees
Insurance
Travel and commuting costs
Costs associated with dependants
Regular discretionary spending, such as holidays, hobbies and socialising
Existing credit commitments can reduce your borrowing capacity because they leave less of your income available for mortgage repayments.
Even smaller commitments, such as buy-now-pay-later agreements, can be taken into account when lenders assess affordability.
Your spending habits
Lenders may review your bank statements to understand your usual spending patterns.
You’ll typically be asked to provide around three to six months of statements, depending on the lender and your circumstances.
There isn’t a fixed amount that you’re allowed to spend each month to qualify for a mortgage. Instead, lenders consider your overall financial position and whether you have enough disposable income to comfortably meet your mortgage repayments.
If your outgoings are high compared with your income, you may be offered a smaller mortgage than someone earning the same salary but with fewer financial commitments.
Top tip: Before applying, make a realistic list of your regular monthly expenses. This can help you understand how much you could comfortably afford to spend on your mortgage, rather than simply borrowing the maximum a lender offers.
Credit report and borrowing history
Mortgage lenders will also consider your credit history. This helps them assess how you've managed borrowing and whether you've made payments on time.
A stronger credit history can improve your chances of being accepted and may give you access to more competitive mortgage rates.
You can check your credit score for free with our Credit Score check tool.
Find out how much you could potentially afford to mortgage with our free mortgage calculator tool
What do I need to show to prove my mortgage eligibility?
To show mortgage lenders you're eligible, you'll need the following:
Proof of identity
Passport
Driving licence
Council tax bill
Utility bills dated within three months
Bank statements
Proof of income
Payslips from the past three months
Evidence of any bonuses or commission
Bank statements from the past three to six months (this should be the account your salary is paid into)
Your latest P60
To prove your income from self-employment, you’ll need:
Two or more years of certified accounts
SA302 forms or a tax year overview (from HMRC) for the past two or three years
Evidence of upcoming contracts (if you’re a contractor)
Evidence of dividend payments or retained profits (if you’re a company director)
Proof of spending
Six months’ worth of bank and credit card statements so they can assess your spending patterns and financial commitments
How do I test my mortgage eligibility?
A good way to check whether you are eligible for a specific type of mortgage, even before submitting your ‘official’ application, is go through a mortgage comparison and obtain a mortgage in principle from a lender.
By doing so, you can test if you’re likely to be approved and understand which types of mortgages you would qualify for.
An agreement in principle can give you an idea of how much you may be able to borrow, but it isn’t a guarantee that your full mortgage application will be accepted.
Am I still eligible for a mortgage if I have bad credit?
The answer is yes, you can generally get a mortgage with a fair or bad credit score.
However, having bad credit could make it more challenging to take out the loan amount you’re hoping for. Not only that, but you’re likely to face higher interest rates.
It is also worth mentioning that bad-credit mortgages usually require a larger deposit. So make sure to take all these factors into consideration when scouring the market in search of the right mortgage deal.
How can I improve my chances of getting a mortgage?
Before applying, you could:
Check your credit report for errors
Keep up with existing repayments
Reduce outstanding debts where possible
Avoid taking on unnecessary new credit
Review your regular monthly spending
Save a larger deposit if possible
Make sure you have the documents needed to prove your income and outgoings
Compare mortgages with MoneySuperMarket
Compare mortgage deals with MoneySuperMarket to see a range of options based on your circumstances and borrowing needs.
Comparing deals can help you understand the rates, fees and monthly repayments available, so you can find a mortgage that works for you.
Your mortgage is secured on your home, which you could lose if you do not keep up your mortgage repayments.
Frequently asked questions
Does my monthly spending affect how much I can borrow?
Yes it can do. Lenders assess your income alongside your regular expenses and financial commitments. Higher outgoings can reduce the amount you’re able to borrow because less of your income is available for mortgage repayments.
What outgoings do mortgage lenders look at?
Lenders can consider household bills, childcare, transport, insurance, debt repayments and other regular living costs. They may also look at discretionary spending and your wider spending patterns through your bank statements.
Can I reduce my outgoings before applying for a mortgage?
Reducing unnecessary spending or paying down existing debts could improve your affordability position.
However, you shouldn’t make artificial changes to your finances simply to pass an affordability assessment. Lenders are interested in your sustainable financial position.
Does a higher salary guarantee mortgage eligibility?
No. Income is important, but lenders also consider your outgoings, existing debts, credit history, deposit and other circumstances. Two people with the same salary could therefore qualify to borrow different amounts.
How much can I borrow for a mortgage?
There’s no single amount that applies to everyone. Lenders consider your income, deposit and affordability, including your monthly expenses and financial commitments.
Author
Ashton Berkhauer
General Manager • Commercial
Currently the General Manager for Home Services and Mortgages, Ashton observes the markets and, along with his team, strives to get the best possible solutions for consumers. The products within his...
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Collette Shackleton
Content Writer
Collette is an experienced Content Writer at MoneySuperMarket, helping people make sense of money and insurance topics without the jargon. She shares her experience as a first-time Mum and top...
