5 things that could affect your mortgage application that you might not expect

Think getting a mortgage is simply a case of proving your income and showing you’ve saved a decent deposit? Not quite.

When you apply for a mortgage, lenders look at the bigger picture. This typically includes from your regular outgoings and existing commitments to your employment and everyday money habits. Some of these factors can have more of an impact than you might expect.

The good news? Knowing what lenders could be looking at means you can get prepared before you apply, rather than discovering potential issues halfway through the process.

Debt to income ratio in mortgage applications

Before looking at the individual things that could affect your application, it’s helpful to understand debt-to-income (DTI). Put simply, this looks at how your existing debts and financial commitments compare with your income. Sometimes, lenders feel that the more of your monthly income that is already committed to things like loans, credit cards and car finance, the less income you may have available to put towards a mortgage.

Lenders use affordability assessments to understand whether your proposed mortgage payments are manageable alongside your existing commitments and household expenses.

There isn’t one universal DTI threshold that every lender uses, so having a higher level of existing borrowing doesn’t automatically mean your mortgage application will be unsuccessful. However, it can influence how much you may be able to borrow and which lenders could be suitable for you.

That’s why it’s worth looking beyond your salary when preparing for a mortgage application. Your overall financial picture can be just as important.

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Here are five things worth checking before you start your mortgage application.

1. Your existing credit commitments

It isn’t just your income that matters. Lenders will also look at what you already pay each month.

Debts you’re repaying like credit cards, personal loans, and other borrowing can all affect your affordability. Even if you’re managing these payments comfortably, they reduce the amount of your income available for a new mortgage.

This doesn’t mean you need to clear every debt before applying. Different lenders have different affordability criteria, so it’s about understanding how your existing commitments could affect your borrowing capacity.

2. Car finance and other monthly payments

Car finance is particularly worth considering because the monthly payment can be significant and agreements can run for several years.

A lender may take your existing car finance payment into account when assessing affordability. This could mean two applicants with identical salaries and deposits have different borrowing capacities because their monthly financial commitments are different.

If you’re planning to apply for a mortgage soon, it’s worth understanding how any existing finance agreements could affect your application before taking on additional borrowing.

3. Changes to your employment or income

A new job or change in employment status can sometimes affect how a lender assesses your application.

For example, if you’ve recently changed jobs, moved from employed to self-employed, reduced your hours or started receiving a significant proportion of your income through bonuses or commission, a lender may want additional information.

That doesn’t necessarily mean your application will be declined. Lenders have different approaches to different types of income and employment circumstances. But if you’re considering a career change and also planning to apply for a mortgage, it can be sensible to speak to a broker before making the move so you understand how it could affect your options.

4. Your overdraft and how you manage your money

An arranged overdraft isn’t automatically a problem when applying for a mortgage. However, the way you use your current account can form part of the wider picture of your finances.

Regularly relying on an overdraft, particularly if you’re frequently close to or beyond your agreed limit, could raise questions about how comfortably you’re managing your monthly finances.

It’s therefore worth keeping an eye on your day-to-day finances in the months before applying. Consistent, manageable spending and staying within your agreed limits can help demonstrate that your finances are under control.

5. Taking out new credit before applying

Found the perfect sofa? Thinking about financing a new car? Planning to put a holiday on a credit card?

You might want to think carefully about it if you’re about to apply for a mortgage.

Taking out new credit can create additional monthly commitments and may result in a new credit search appearing on your credit file. Multiple applications for credit over a short period can also be something lenders consider when assessing your overall financial position.

This doesn’t mean you shouldn’t use credit at all. The important thing is to avoid making significant financial changes without considering how they could affect your mortgage application.

Looking at the whole picture

A mortgage application isn’t assessed on one factor in isolation. Lenders will look at your income, expenditure, existing commitments, credit history, employment circumstances and other information to decide how much they’re prepared to lend.

And because every lender has its own criteria, the outcome isn’t always as straightforward as simply asking, “How much do I earn?”

If you’re thinking about applying for a mortgage, getting your finances in order early can make the process smoother and help you understand what you may be able to borrow.

A mortgage broker can also help you understand how different lenders may assess your circumstances and identify options that could be suitable for you.

The more you know before you apply, the fewer surprises you’re likely to encounter along the way.