10 red flags on a bank statement which could stop you getting a mortgage

New research from Boon Brokers has discovered that 83 per cent of people across the country are not aware of certain activity on their bank statements which could be a red flag to a mortgage lender.

A survey of 2,863 UK residents conducted by TLF on behalf of the mortgage broker also found that 58 per cent of participants had never considered that gambling transactions on their account may cause any issues.

One in two people (47%) have gambled in the last month, yet many aren’t aware that by doing so, they could be jeopardizing their chances of getting a good mortgage deal.

When given a list of transactions which might give lenders a reason to take a closer look, 55 per cent didn’t feel that payday loans would be a cause for concern, and 58 per cent didn’t feel that being constantly in an overdraft would be a red flag.

Three in four (72%) didn’t believe that having multiple payments coming in with no clear reference of what they were for could ring alarm bells, according to Boon Brokers.

Gerard Boon, partner at Boon Brokers, said: “Not all lenders will scrutinize your bank statements, but if you’re seen as a higher risk, perhaps with a smaller deposit or from being self-employed, lenders are more likely to take a closer look. Anything which shows that the account holder may struggle with debt or to control their spending is likely to create questions.”

He continued: “Our research revealed that the equivalent of 1.38 million current homeowners would consider trying to hide transactions on their bank statement to make sure their mortgage got approved – which we definitely would not recommend.

“If you’re planning on applying for a mortgage or remortgage in the next six months, it’s worth being aware of what may lead to further investigations – even though in many cases it’s totally harmless and easy to explain.”

I have added that this could cause unnecessary delays to your mortgage application which could stop you getting the property you want.

However, not all the things that could cause an issue are as easily identifiable as gambling, payday loans or being in an overdraft, but there are others too.

Boon Brokers’ research revealed the transactions people were least likely to know may be a red flag to a mortgage lender.

Working for a family business

Just three per cent of people realized this could be an issue. Lenders can be suspicious that a family member has employed a relative for the purpose of them being able to take out a mortgage.

Using rude or joke references for payments to family and friends

Only one in 10 (9%) said they thought it could cause any hold up with a mortgage application, but using ‘funny’ references which could be misconstructed may mean a lender needs to investigate further.

There are several innocent looking transactions which could cost you a mortgage
There are several innocent looking transactions which could cost you a mortgage

Having multiple payments for luxury items

Only nine per cent thought this could be of potential concern. Lenders will worry if they feel that spending is out of control and exceeds what they would expect based on the applicant’s income

Having lots of PayPal transactions

Although PayPal transactions in themselves are not a problem, because it’s not always clear who is being paid, having lots of vague PayPal transactions can raise concerns.

Catalog or on credit payments

Buy now, pay later options may signal to a lender that you are unable to pay for day-to-day items upfront, or are buying things beyond your means – something which only 13 per cent of people realized.

playing bingo

Playing once in a while for fun with friends will cause no concerns, but a regular habit with larger sums could be classed as gambling, which may raise a red flag.

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multiple store cards

Store cards in themselves are not an issue, but if you’re struggling to clear the balance every month, given their notoriously high interest rate, it could be a warning sign to the lender.

Frequent payments to unknown third parties

There are lots of above board reasons to make frequent payments to third parties, but where possible, it’s best to make the reason clear to minimize any risk of a red flag.

Large cash deposits or cash-in-hand work

Surprisingly, only 20 per cent of people thought this would be of any interest to a mortgage lender, who will want to see evidence of steady, reliable and legitimate income.

Taking out a recent credit card

Only one in five people (22%) realized that applying for new credit can knock your credit score, which is something all lenders will look at to assess your eligibility.

To read all 15 red flags which could affect your mortgage application visit the Boon Brokers website here.

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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