Mortgage Lending Criteria

Lenders Criteria for Assessing Mortgage Applications

Lenders have various criteria that they use in assessing an application.

Income Multiple

Lenders traditionally aim to lend a specified multiple of gross income. In the past, this has been as much as five times earnings. These days most lenders pay more attention to affordability guidelines rather then income multiples. Buy to let lenders would normally expect rental income to be in excess of any monthly mortgage payments.

Deposit

Lenders like to see a contribution by the borrower as this shows ability to save

Loan to Value (LTV)

This is the amount of the loan as a percentage of the value of the property. The lower the percentage the greater the contribution by the borrower so the more comfortable the lender will be to lend. Many of the very best interest rate deals are available where the LTV is 75% or less.

Affordability

Lenders will look for monthly mortgage to be no more than a set percentage of gross monthly income, normally in the region of up to 35% . Buy to let lenders would normally expect rental income to be in excess of any monthly mortgage payments.

Credit History

Lenders will like to see a clean credit record and evidence of maintaining payments to any previous lenders and/or landlords.

References

Lenders will look to approach employers to confirm income and that a job is permanent. For the self employed references from an accountant may be sought.

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