If you’re thinking about applying for a mortgage, one of the most overlooked, yet critical parts of the process is your bank statements. Lenders don’t just glance at your income; they scrutinise your spending habits, financial stability, and even the tone of your transactions.
So, how can you make sure your statements paint the right picture?
Here’s your guide to preparing your bank statements for a mortgage application, especially if you’re navigating modern day spending trends like Klarna and contactless everything.
Why Do Lenders Check Your Bank Statements?
Lenders ask for up to 3 months of bank statements to (they could ask for more):
- Verify your income matches what’s on your application
- Assess affordability and consistency of spending
- Check for signs of financial risk or irresponsibility
- Identify unexplained large credits or debits
- Ensure your deposit source is legitimate
The aim? To ensure you’re not overcommitted and can realistically afford the mortgage repayments, even if interest rates rise or your circumstances change.
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Tidy Up Any Gambling Transactions
Gambling, even if it’s the odd flutter on the weekend can raise red flags. A few bets here and there won’t automatically derail your application, but consistent or high-stakes betting might. It signals potential financial instability.
🔎 Top Tip: If you do gamble, try to stop (or significantly reduce) activity at least 3 months before you apply. Avoid betting on payday, it can look impulsive.
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Avoid Returned Direct Debits
Returned (or failed) direct debits are a big no-no. They suggest you’re living too close to your financial edge and can’t cover your outgoings.
💡 What to do: Set up reminders, monitor your balance, and make sure all bills are paid on time, especially in the months leading up to your mortgage application.
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Mind Your Overdraft Usage
Using your overdraft occasionally is fine. Living in it? Not so much. Regular or maxed-out overdraft use tells lenders you’re not managing cash flow well.
📉 Lender’s view: Someone reliant on an overdraft could struggle with unexpected costs, like a leaky roof or boiler breakdown, after getting a mortgage.
🛠️ Fix it: Try to stay in credit and gradually reduce reliance if you can.
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Silly References for Deposits? Think Again
It might seem funny to write “drug money” or “bribe” when transferring cash to a mate, but lenders won’t laugh. Those comments can slow down your application or trigger extra checks.
🔐 Keep it professional: Use proper references like “gift from mum” or “transfer from savings.”
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Unexplained Large Credits or Debits
If money lands in your account and it’s not your salary or a regular source, be ready to explain it, and show proof. Lenders must check for money laundering risks and ensure deposits are from acceptable sources.
💸 Common pitfalls:
- Large cash gifts without a letter
- Transfers from joint accounts with no clarification
- Selling items online with no receipts or trail
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Klarna and Buy Now, Pay Later Schemes
The rise of services like Klarna has made it easy to split payments and stay stylish. But multiple “BNPL” entries can be a warning sign to lenders.
As we mentioned in our blog on Klarna, these platforms don’t always show on your credit file, but they do show up on your bank statements. Frequent use can make it look like you’re borrowing to maintain your lifestyle.
📊 What’s acceptable? Occasional use is fine, but if your statements are littered with Klarna payments, it could imply financial overstretching.
👀 Need a refresher? Read our blog on Klarna and mortgages here.
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Get Organised Before You Apply
Here’s a quick checklist to whip your statements into shape:
✅ No gambling or very minimal
✅ Avoid overdraft usage
✅ Ensure all bills and direct debits are paid on time
✅ Clear, professional references on transfers
✅ Keep a record of large gifts or unusual deposits
✅ Limit use of BNPL services like Klarna
✅ Review your last 3 months and clean things up where you can
Final Thoughts
Getting your bank statements mortgage-ready isn’t about being perfect, it’s about showing you’re responsible, stable, and ready for homeownership. A good mortgage broker will help you navigate the process, but it starts with making sure your finances are telling the right story.
💬 Want us to review your statements before you apply? Get in touch with our friendly, expert team we’re here to help make mortgage applications less stressful and more successful.
