Before 2011, self-certification mortgages were available so mortgage applicants could ‘self-certify’ their own earnings without providing any proof of income. As you can imagine, this scheme was open to abuse and many home buyers landed themselves with mortgages they couldn’t afford.
After the credit crunch in 2011, self-certification mortgages were banned in the UK. So now, as part of your mortgage application, you will need to provide proof of your income to your chosen mortgage lender.
By doing so, you are more likely to get a mortgage that you can afford as the lender will assess your earnings and, if you qualify for a mortgage, offer you a loan that you should be able to repay.
But what will they ask for as proof of income? And what other documents are required with mortgage applications? Keep reading to learn more and then get in touch with a specialist mortgage broker at YesCanDo Money if you have further questions after reading our guide.
What do you need to apply for a mortgage?
The documents needed for your mortgage application will depend on the lending criteria. There can be some variations between mortgage providers but generally speaking, most lenders will ask you to provide the following as part of your mortgage application.
How many months payslips for mortgage?
Mortgage lenders cross-reference your declared earnings using your payslips and the statements from your corresponding account.
If you are employed, your lender will want to see at least 3 months’ worth of payslips and 2 P60s. If you have only been employed for a short time and don’t have any payslips to show, you may be able to use your signed contract of employment as proof of income.
If you are self-employed, you won’t have any payslips. To prove your income, the lender will ask you to provide your SA302 or tax year overview, a full set of your company accounts, and a reference from your accountant.
What your payslip must show to a mortgage lender
The following must be included on your payslips:
- Your employer’s name (it must correspond with the employer name given on your mortgage application)
- Your net income
- Pay dates
- The tax period
- Bonus income, such as commission or overtime pay
- Your address details
Bank statements
When it comes to providing bank statements, you will usually be asked for bank statements that cover the last 3-6 months. These statements can be downloaded and printed online or retrieved from your local bank.
What your bank statements must show
The following must be included on your bank account statements:
- Bank account number and sort code
- The logo of the bank/building society
- Your name and contact details
- A sum total of funds (running balance)
- A full overview of your personal income/spending during the months stipulated by the lender
Other sources of annual income
If your mortgage application relies on other sources of income outside of payslips, you need to provide proof of this income.
Your lender will let you know what documents they require although in some cases, a bank statement showing some of these other income sources may be sufficient as income proof.
Other sources of annual income can include:
- Undrawn pension pots
- Money earned from investments, such as rental income from your property portfolio
- Stipend income
- Bursary/grant income
- Overseas income
- State benefit income, such as Universal Credit and Disability Allowance.
Self-employed applicants will also need to provide their HMRC tax calculations, business accounts, and the other documents we mentioned earlier.
If you are in continuous employment but also earn money on the side from self-employment, you will also need to provide evidence of your self-employed income. A good example of this can be doctors. Doctors are often employed by the NHS and also can also be self-employed for any private work.
What proof do mortgage lenders need?
As part of their mortgage affordability test and funding criteria, mortgage lenders need to prove your income. Lenders will ask you for more than your bank statements and payslips when you make your mortgage application. They will also ask you for documents that provide evidence of your identity, address, and employment, as well as other pieces of evidence that affect your approximate annual income.
As such, you should get together the following documents before you make your application.
Photo ID
To comply with money laundering regulations and to protect themselves from fraud, your mortgage provider will need to see a form of photo ID to check that you are who you say you are.
Types of photo ID include:
- A current passport
- A current driving license
- A national identity card
Proof of address
As evidence of your address, most mortgage lenders will ask to see at least two of the following.
- Your latest council tax bill
- Your most recent council tax demand letter
- Your latest utility bill
- Bank or building society statements that are less than 3 months old
- Your driving license
- Your latest HMRC tax demand
Proof of income required qualify mortgage
Your payslips and the statements from your bank both act as proof of income. Most lenders will also ask for the following.
- P60 documents from the last 2 years
- A signed contract of employment (if no payslips are available)
- Evidence of bonuses, overtime, and commission (if not seen on your payslips)
- Documents evidencing benefit income, such as a Universal Credit awards letter
- Proof of pension, such as an official letter from the Department of Work and Pensions (DWP)
- A documented history and proof of income from your rental income if you’re a landlord
- 1-3 years of certified accounts, tax calculations, and an accountant’s certificate if you are working in a self-employed capacity as a sole trader, owner of a limited company, or a business partner
Proof of employment
When you’re on the quest for a mortgage in the UK, be prepared to show proof of employment as well as income. This usually means providing a couple of your latest pay slips (or their digital equivalent) and your most recent P60 form, which outlines your total earnings and the taxes you’ve paid.
Most lenders start off by using income multiples as a benchmark for lending, with the standard hovering around 4.5 times your annual income. However, bear in mind that some lenders might adopt a different approach to calculating your income, such as factoring in your overtime, bonuses, or commission.
It’s important to remember that various types of employment exist, including full-time, part-time, self-employed, and fixed term contract work. The evidence required for your income might differ based on your employment type. For instance, if you’re self-employed, you might need to furnish an array of documents to verify your income, like bank statements, tax forms, and a financial statement from your accountant.
Usually providing the following as proof of employment is sufficient:
- Your most recent payslips
- Your signed employment contract
- A job offer letter (if you are about to start a new job)
Outgoing finances
When calculating affordability, mortgage lenders will look at spending as well as wanting proof of income.
Bad spending habits can lead to a declined mortgage application so be sure to get your finances under control before you apply to borrow money from a lender.
You can get your finances under control by:
- Reducing your debts and utility expenses
- Limiting unnecessary spending
- Putting money into a savings account
- Seeking help from a specialist finance advisor
The types of outgoing finances that lenders will request details of are:
- Utility bills
- Food/grocery bills
- Loan repayment plans (such as overdraft payments and car loans)
- Other debts you are repaying (such as credit cards and other bank loans)
- Details of insurance policies you hold (such as life insurance and car insurance)
After reviewing your outgoings, your lender will be able to see what your disposable income is each month. They will want to see recent bank statements and use these to determine how much to offer you on a mortgage deal.
Can I get a mortgage if I provide evidence of all of the above information?
Yes, if you provide all of the information that we listed, you will definitely increase your chances of mortgage approval.
However, there is still the possibility that your mortgage application might get declined by the lender’s mortgage underwriter if any of the following are true.
The details you provided in the application are not matched by the proof
If the information in your application doesn’t tally with the information in the documents you have provided, such as the details you have given about your employer and your basic salary, it is our experience that you might be denied a mortgage.
If you purposely provide false information, you do so at your own risk, as you may be accused of mortgage fraud if the lender discovers any discrepancies between your application and your documents. This could lead to severe consequences for you.
It has been our observation that mistakes can also be made so you might provide the wrong information in error. Most lenders will be understanding of this but to avoid the possibility of mistakes, we have come across this many many times and therefore we recommend our services to you as we will carefully complete your application on your behalf.
Outstanding debt
The more debt you have, the bigger the risk you are to the lender. This is because such things as credit cards, store cards, bank loans, and car loans can have an effect on your disposable income and your ability to make regular payments on a mortgage.
If your income covers all of your debt payments and you still have enough money left over to manage a mortgage, then your lender might still look favourably upon you. However, if your financial situation is negatively affected by your debt payments, you may be denied a mortgage.
To improve your chances of being approved for a mortgage and to gain access to a better mortgage deal, do what you can to reduce or clear your debts before you make your mortgage application.
In late 2022 we entered a recession and although there are some specialist mortgage lenders that may consider large debt they will look deep into your credit history and it is likely that you will be offered an interest rate that reflects your credit score and therefore higher monthly mortgage repayments.
Credit rating/financial history
There are a number of factors within your financial history that can negatively impact your credit rating. These include:
- Hard credit searches (these take place whenever you apply for credit)
- Missed or late payments on personal loans
- Accounts that have gone into arrears
- CCJs or bankruptcy
- Regular changes of address
With very few mortgage providers lending to customers with a bad credit rating, it is in your best interests to check your credit file and improve your credit score if it is very low.
If you do have a bad credit score, you might still be offered a mortgage by a specialist lender. However, you will likely be ruled out of the best mortgage deals so it’s still advisable to improve your score before you make your application.
Financial association
You might have an excellent credit score but if you are financially associated with somebody who doesn’t, perhaps because they have defaulted on mortgage payments in the past, then your credit score and your chances of getting a mortgage will be negatively affected.
You are financially associated with somebody when you share or apply for a joint account or loan with them.
If you no longer share finances with the person you have been financially associated with, it is possible to remove them from your credit report. You can do this by contacting one of the credit reference agencies.
If you are thinking about opening a joint account or taking out a loan with somebody else, ask them about their financial history and reconsider your plans if they have experienced issues that have hurt their credit score.
Improve your chances of getting a mortgage approved with help from YesCanDo
Are you looking for expert mortgage advice and support? If so, contact us about a mortgage online and we will appoint an experienced mortgage advisor for you. We will carry out a affordability assessment and an agreement in principle if required. Also even better we won’t charge you a penny as we are a fees-free mortgage broker.
How our mortgage advisors can help
Your online mortgage advisor will provide mortgage advice tailored to your particular situation and will advise you on the steps you might need to take to increase your chances of getting a higher income multiple and ultimately a mortgage approval. They might advise you to reduce your existing debt, for example, and if your credit score is low, they will advise you on how to improve it.
Your appointed advisor will also let you know what paperwork you need to gather before you make your application. The documents needed will include those we have already listed within this article, such as the payslips required to prove your net pay. We are really experienced at speeding up a mortgage application process by providing the exact information each lender will need. So you are in very safe and experienced hands.
After you have taken all of the relevant steps, your online mortgage advisor will make sure you get the right mortgage for your situation. They will do this by searching the entirety of the mortgage market until they have found the mortgage providers with the lowest interest rates and deals that are ideal for you.
When your mortgage introducer has matched you to a lender and you are happy to go ahead, they will then complete your mortgage application on your behalf to ensure it meets the lender’s requirements.
We are the right mortgage broker to do all of this and more for you. Even better is we are a FREE to use mortgage broker, which means there is no charge for any of our services.
Get in touch with our team if you would like to know more.
