When looking at a bank statement, a mortgage underwriter is trying to figure out what borrowers mortgage affordability could be.

Mortgage lenders will usually request at least 3 months worth of bank statements before they make a mortgage offer but usually, after you have received a mortgage in principle. It is the mortgage underwriters job to look at these bank statements and make a determination on if the borrowers s eligible for a product the mortgage lender offers.

The bank statements will allow the mortgage lender to carry out a deep dive on your finances and ensure you meet their eligibility requirements.

Mortgage underwriters will have a firm list of things which they check for but they could also spot other things which stick out to them and these could affect your mortgage affordability.

Your address matches

When looking at your bank statements the mortgage underwriter will first look to see if your address details match the address you have provided on your identity documents and on your mortgage in principle application.

Your name matches

The mortgage underwriter will also look on your bank statement to ensure the name you have given and the name on your identity documents matches the name on your bank statements. If there are any errors then you may have to get your name changed on your bank statement.

Your income matches

The mortgage underwriter will also look on your bank statement to ensure that the income you have stated you earned and the income being seen on your payslips or on your accounts matches with what actually goes into your bank every month.

Your committed expenditure

The mortgage underwriter will look at your bank statements to derive what your monthly cost is on committed expenses. These are expenses which you must pay every month such as rent, mortgages, loan repayments etc.

Your committed expenditure is an important factor when trying to work out your mortgage affordability.

Your lifestyle expenditure

The mortgage underwriter will look on your bank statements for any expenses which may fit into your lifestyle expenses section. Lifestyle expenses are expenses that you can do without such as gym, dining out etc. The mortgage underwriter will want to identify these expenses as they will be vital when trying to figure out your mortgage affordability through stress testing. So, if you had to cut down on your monthly costs to be able to afford your mortgage then these are the most likely costs which you will want to cut off.

Your monthly disposable income

Your disposable income is one of the most important factors which the mortgage underwriter will look at when looking at your bank statement. The mortgage underwriter will look at this as it allows them to know how much you can truly afford to spend on your mortgage every month.

Your disposable income s the amount of money you have left after your committed expenses and lifestyle expenses have been utilised

Unusual financial behaviour

The mortgage lender will also look for unusual behaviour when looking at your bank statement. Things such as huge cash deposits, random large sums of money being paid in or inactivity could be red flags to the mortgage underwriter if spotted on your bank statement. If you cannot account for why the cash deposits were put in your account then this could also be very troubling.

Another thing which can stick out to the mortgage underwriter if spotted on your bank statement could be gambling or payday loan repayments. These sort of behaviours may indicate that you are financially unstable as you tend to gamble or tend to over-rely on payday loans etc.

If you are also constantly in your overdraft then the mortgage underwriter could spot this on your bank statements and it could stand out as a negative thing as it indicates that you are not financially stable.

The mortgage underwriter may also look for suggestive card payments on your bank statement. These are payments that give a reference to an event or product. E.g lots of shopping being done at the pet store may indicate you have a pet you care for who’s monthly care costs may be taken into account when considering your mortgage affordability.

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.