Preparing your documents

Preparing your documents

Understandably, lenders are often handing over hundreds of thousands of pounds every time they agree a mortgage so it should come as no surprise that they are going to want to complete some due diligence to ensure that you are in a position to pay that money back. The extent of how many and what kind of documents will be requested will vary considerably depending on many factors such as Loan To Value % (the amount you borrow against a property’s worth), income type, commitments & mortgage type to list a couple. Not to mention that even if a bank doesn’t want to read a sack full of documents, the regulator (the Financial Conduct Authority) require lenders to assess a customers situation for the customers protection as much as their own. Lets take a look at the type of documents that will need to be shared.

Bank Statements

This is to evidence many things. Lenders are looking for evidence of income payments, credit commitment payments, unusual activity and they will use these do check there is sufficient affordability to meet the mortgage repayments. Lenders will usually ask to see the most recent 3-4 months of bank statements but can ask for up to 12 months depending on the specifics of your situation.

Proof of income

As it sounds, this is to evidence the level of income you receive. This can be pay slips, P60, benefits awards letters, HMRC Tax Calculations and overviews, Company accounts, rental income, maintenance payments, investment income etc. If your employed, lenders will usually want to see the latest 3-4 months of payslips for basic salary and up to 2 years’ worth of variable income evidence depending on the frequency and consistency of bonus/commission/overtime income. If you are Self Employed, most lenders will want to see the last 3 years’ worth of HMRC documents or company accounts.

ID, Address, Residency and Nationality

Along with proving your rights to live and work in the UK, this is also to enable to lender to run anti money laundering and credit checks on you. This is usually evidenced by providing Passports, Driving Licenses, Visas, Home Office Letters or a biometric residence permit.

Evidence of Deposit

This is to make sure that you have the funds available to make the purchase possible. If this is from personal savings, then lenders are usually going to want to see bank statements or statements of any investment account these funds are held in. If the funds are being gifted to you, lenders will usually need a form to be completed detailing the gifted sum and gifting parties. Lenders usually want to see a build up of any savings so it’s good practice to show 4-6 months of your savings accounts or investment account statements

Other Documents

The lender may want to see other documents relating to any of the above. It isn’t uncommon for lenders to request information about any loans, mortgages, overdrafts or credit agreement & insurance products you have.

Other information

The lender will also need to see details of your solicitor and the person/firm you’re buying from, such as the property seller or estate agent.

Ideal Document format

Different lenders will have slightly different policies when it comes to what format of documents they need to see. The general rule of thumb is that the majority of lenders will want to see the original, PDF or photocopy/scanned copies of documents.

For ID – original or photocopied scans is best practise.

For proof of address – PDF downloaded bank statement/letter or physically delivered council tax letter photocopy

For Income – the vast majority of lenders will accept downloaded PDF documents. Payslips, P60, HMRC documents, company accounts, employment contracts, invoices etc

Bank Statements – Ideally, PDF downloads of original statements from your online account. If not, photocopied scans of the full statements

Some things to avoid

Photos/copies of documents where there is background visible, hands in view, data/info being obscured.

Expired documents

Redacted information – lenders will need to see the true document and won’t accept redacted versions

Excel spreadsheets – when downloading bank statements – don’t download CSV or other excel versions of your transactions – these can’t be accepted

Funny friends – Rather, funny friends that put silly comments on bank transfers to pay you back for lunch. Avoid having any rude or misleading money transfers on your bank statements. It’s funny in the moment but less funny when we need to explain this to the mortgage lender.

Most Importantly

Just ask your broker – they’ll know what is needed for your particular circumstances. Arranging mortgages is what they do day in, day out.

Mortgage Packaging

“Packaging” is the term used to refer to the assembled collection of documents that lenders want to see. Every lender will have their own list of what they need to see and that list changes dependant on the specific details of the mortgage being applied for. Your broker knows this and can navigate how to best position your case in front of the underwriter, the decision maker, to ensure that we get the right outcome. This is important because your broker will understand what documents to provide but more importantly, what documents not to provide to make sure that we can avoid unnecessary delays.

Why is my broker asking so many questions?

It may seem like your broker is asking overly sensitive or private questions about transactions on your bank statements, income documents or your personal situation. This is purely because your broker needs to understand your situation completely to be able to:

• Advise you correctly and give you suitable advice
• Ensure that we are abiding by regulations, compliance standards and customer care provisions – mortgages (and the professionals who advise on them) are amongst the most regulated products in the UK
• Pre-empt underwriter questioning and to make sure that we can position your mortgage application in the best possible light to the right lender to ensure your application proceeds as smoothly as possible

This article was written by Chris Billingham

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.