ID, Paper Bank Statements or Paper Payslips
 

One of the main parts of a mortgage application is checking affordability. This is where lenders decide how much you can afford to borrow. They will look at your income and your outgoings to make their decision. But what counts as income?

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Basic income 

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For many, their salary will be their main and only source of income. Lenders usually see those who have been at their job for a long time as lower risk as they are seen to have more job security compared to someone who may be in the first month of their new job and still on a probation period.

If you wish for any extra income from your job to count, you will need to prove that the extra income is regular. For example, if you regularly have overtime pay or bonus pay. To prove this, you will need to provide multiple payslips with your overtime and bonus pay on there.

Some lenders won’t accept the extra income and will only look at the basic salary. Therefore for those who may have a low base salary that’s supplemented by commission, you will need to be sure that you approach the correct lenders.

If you have more than one job, you will need also need to provide payslips from your other employers. You’re more than likely need to clarify exactly how many hours you work at each job and how long you have been employed – this is so the lender can determine the stability of the work.

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Freelance and Self Employed Income 

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Freelancers and those who are self employed may have a harder time getting a mortgage but it doesn’t mean that’s it’s not possible.

You will need to provide Business Accounts and/or Tax Returns. For Business Accounts, you will want to be able to show preferable two to three years of accounts, usually signed off by a chartered or certified accountant. For Tax Returns, you might be asked to provide two years of tax calculations and tax year overview forms.

However, someone who is self employed will be assessed on profits, not turnover and if you have chosen to legally minimise declared profits to pay less tax, then you could find it harder to get a mortgage.

Additionally, most mortgage providers will take this into account and Directors may be able to use their company’s profit as proof of suitability with 12 months of records can be enough for some lenders.

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Zero Hour Contracts 

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Some lenders will include income from zero hour contracts subject to seeing evidence of 12 months of payments. In some cases, lenders may decide to only use 50% of your income.

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Other sources of income 

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There are other things that lenders will consider as income such as pension income, investment dividends and Government benefits. You will need to provide evidence of income and show that you receive it regularly.

If you’re a landlord of a different property, not all lenders will accept rental income as additional income. Given that rental income is used to determine suitability for a buy to let mortgage in the first place, it makes sense that it wouldn’t be counted twice.

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Outgoings

You’ll be expected to provide bank statements, usually 3 months’ worth to show how much you are spending each month and to determine your affordability.