People assume a mortgage decision is about how much you earn. Income is the headline, but it is one of four tests, and an application far more often comes apart on the other three — on a credit card you had forgotten about, on the way the deposit arrived in your account, or on the flat itself.
Here is what is being assessed, in roughly the order it tends to matter.
The four tests
- 01Can you afford it, month to month?
The lender takes your income, subtracts your committed spending — loans, car finance, credit card minimums, childcare, maintenance payments — and applies an allowance for ordinary living costs. What is left has to cover the mortgage payment at a rate higher than the one you are taking, so the lending still holds up if rates rise. That last part is why two lenders can look at identical figures and land a long way apart.
- 02Have you handled credit well?
Not whether your score is high — that is a number the credit agencies invent and lenders do not see. What matters is the conduct on the file: payments made on time, accounts not run permanently at their limit, nothing missed recently, and an explanation for anything historic. How long ago something happened usually matters more than what it was.
- 03Where is the deposit from, and is it yours?
The lender and the conveyancer both have to establish the source of the money. Savings built up over time are straightforward. A gift needs the giver to confirm in writing that it is a gift, with no repayment expected and no stake in the property. Money that arrived recently from somewhere unexplained is the most common single cause of a case stalling at the last minute.
- 04Is the property good security?
The lender is lending against the property as much as against you. A valuer checks it is worth the price and is the sort of thing the lender is willing to hold. Short leases, flats above commercial premises, certain construction types, properties with no kitchen or bathroom, and flats in blocks above a certain height all narrow the field of lenders considerably.
The thing worth taking away: lenders do not share one rulebook. They share an approach. The same case can be a comfortable yes at one lender and a decline at another, and neither is wrong — they have different appetites, different affordability models and different lists of what they will not touch.
What people get caught by
A credit card you never use
An unused card with a large limit still reduces what some lenders will advance, because they assess the limit rather than the balance. Closing one you genuinely do not need, well before you apply, can be worth more than a pay rise.
Overtime and bonus
Some lenders count all of it, some half, some none, and most want to see a track record. If a meaningful part of your income is variable, that fact alone changes which lenders are worth approaching.
A recent job change
Probation periods and very short service put some lenders off entirely and trouble others not at all. Changing jobs mid-application is worth mentioning the day it happens, not the week before completion.
The car you are about to buy
Taking finance out between the agreement in principle and the application changes the affordability calculation the application was built on. It is worth waiting until after completion.
So what do you do about it?
- •Get your credit file in front of you before anybody searches it, rather than after a decline. There is a guide on that further down the list.
- •Have three months of bank statements to hand, and read them the way an underwriter would.
- •If the deposit is a gift, start that conversation now — whoever is giving it will need to evidence where it came from too.
- •Do not open new credit, change job or move money around between the agreement in principle and completion without saying so.