Five questions a mortgage lender is going to ask
Posted 12 February 2016 by Nick Parkhouse
Applying for a mortgage can be a tough and time-consuming process. Since major changes to the mortgage market in 2014, banks and building societies now ask a lot more questions about your income, outgoings and future plans than they did in the run-up to the global financial crisis.
So what can you expect from your mortgage interview? Here are five questions your mortgage lender will ask at interview.
What do you earn?
One of the first things your lender will want to know is what you earn. You will have to prove your income from all sources - from work, investments, bonuses, commission and other payments such as child maintenance.
If you're employed you will have to supply proof of earnings such as 3-6 months wage slips and bank statements. If you are self-employed or a contractor you will need to prove earnings for the last two or three years through accounts or tax returns.
Do you have any regular outgoings?
Once they have established your income, a lender will want to know what regular commitments you have in place.
These will include your current housing payments - rent or a mortgage - and they will want to know of any credit commitments you have such as loans, credit cards, overdrafts, store cards or other finance.
What else do you spend your money on?
Your lender doesn't just want to know what regular credit commitments you have. They will also want to explore all of your regular outgoings from child care costs to pension contributions and even what you spend on going out.
Many lenders now want to know what you spend on your social life, clothes, eating out and even whether you gamble. You will have to provide bank statements in order that a lender can examine your outgoings.
Will you be able to afford your mortgage in the future?
A lender has to confirm not just that you can afford your mortgage now but also that you will be able to afford it in the future. This means you are likely to be asked about your future plans. They may want to know whether you intend to start a family or change your employment status - for example going self-employed.
In addition, your lender has to prove that you will be able to afford your mortgage when interest rates rise in the future. They will apply a 'stress test' to ensure your mortgage remains affordable when your repayments rise and so you should be prepared to discuss how you intend to afford your mortgage in the future.
How good is your credit rating?
When you apply for a mortgage your lender will undertake a credit search to find out how good your credit rating is. They want to know that you have responsibly managed credit in the past - both any previous mortgages and other finance such as loans or credit cards.
Expect your lender to ask you about any issues on your credit file such as missed payments. Before starting the mortgage application process it can be a good idea to check your credit file so you can be sure the details are correct.