Typical mortgage interview questions that lenders ask
- By: Ashley Saunders
- December 2020
As buying a home is likely the biggest purchase you’ll make, a lender will want to ensure they’re making a sound financial decision. Part of this process involves a detailed mortgage interview, where the lender will assess your suitability.
If the idea of having a mortgage interview sounds a little scary, don’t worry as it’s a standard process that can easily be prepared for. Again the purpose is to guarantee you can afford the mortgage, verify the source of your mortgage deposit and confirm your identity.
Why is having a mortgage interview important?
Since the financial crash of 2008, the rules governing mortgages have changed. These changes include placing a greater burden on lenders to guarantee they lend more responsibly.
Lenders now have to stress test borrowers to verify that the loan is affordable both now and in the future. They have to assess whether the loan is still affordable if interest rates go up or the borrower’s circumstances change.
Part of verifying all of these details is to meet in person for a mortgage interview. If you’re using a mortgage broker, they will be able to guide you through the process.
What happens during the interview?
Usually, your mortgage interview happens before you submit your mortgage application. It takes between 1 and 3 hours either face-to-face or over the phone. Typically it takes place in one meeting. However, it not uncommon to spread it over a few shorter sessions.
As the aim of the mortgage interview is to collect and verify information, the mortgage adviser or lender’s representative will cover your situation in depth. So don’t be alarmed if some questions are personal.
All of these details help them to build up a complete picture of your situation. This allows them to correctly advise you and help you to choose a mortgage product that’s the best fit for your current circumstances and your goals.
By the end of the mortgage interview session, you should understand your finance better and be clearer of what mortgage you can afford.
What information should I bring?
As you’ll need to provide proof of your income, you need to bring a few documents, which will vary depending on your situation.
If you’re employed:
- Last three payslips
- Last three months’ bank statements
- Proof of any bonuses or commission
If you’re self-employed:
- Last 2 to 3 years of signed accounts or tax returns
- Your Self Assessment tax return
To verify your identity and address, you’ll need to bring, at least 2 of the following:
- Valid photo ID (such as a passport or photocard driving licence)
- Council tax statement
- Current bank statements (last 3 months)
- Credit/debit card statements (last 3 months)
- Utility bills (last 3 months)
If you have been at your current address for under 3 years, then you need to bring proof of any previous addresses. It’s a good idea to take up to 5 years of information.
It’s worth checking if the lender requires documents in a certain format. For example, some won’t accept an internet print-out of statements or bills.
Origin of deposit
Lenders must know where your deposit is coming from. If you’re using savings, then you’ll be able to prove this with your banking statements. Should your parents or another family member be helping you, then the bank will want to see a letter from them stating whether the money is a gift or a loan.
Your credit history
Before lending you a penny, any bank will want to be sure you will pay them back. They will look at your credit history and your credit score to assess how well you have handled borrowing in the past.
They will ask you if you have or had a County Court Judgment (CCJ) or any other Court Order for non-payment of a debt. If you had any then this could be an issue for your mortgage application and you’ll need to ask your mortgage broker what your next step.
You’ll be asked if you’ve ever been in arrears for a mortgage, rent, loans, credit cards or store cards. They’ll want to know if you’re property has been repossessed or been refused a mortgage or credit. Also, they will ask you if you have ever been declared bankrupt or insolvent.
Understanding your monthly spending
The purpose of the mortgage interview is to calculate what you can comfortably afford to live on each month on a mortgage while taking into account your income, expenses and current lifestyle. So expect to be asked what you spend each month and why.
Also, be aware that the lender may want to keep some of your documents to support your application. But don’t worry as these will be returned to you.
Your regular expenditure on the basics including food, utilities, phones and travel (such as to work or the school run) as well as buildings insurance (a condition of your mortgage). If you live in a leasehold property, then you’ll need to include ground rent and service charges.
Quality of living costs
Life without new clothes, the odd night out, a few luxuries and Netflix isn’t worth it! Of course, you can technically live without owning much stuff but you want to show the bank that you have enough money to enjoy a good quality of life.
While you should pay off all your debts before building a deposit, lenders want to see that you’re paying off any debt and being responsible. You should know how much your monthly debt repayment are including credit card bills, loans or hire purchase payments.
Your future plans
Any lender wants to make good financial decisions and part of this is ensuring you can afford to borrow now and in the future. Expect as part of your mortgage interview to be asked about your 5-year or 10-year plan.
They might ask you some of the following:
- Could you expect your income to go down?
- Will your expenditure to increase?
- Do you have any children or other dependants?
- Are you planning to leave your job, start a business or become self-employed?
- Do you expect any other changes to your personal circumstances?
Do you have a pension plan?
As you will want to retire at some point, lenders will typically only lend up to 65 years old as your income will fall significantly after you retire.
However, if you plan to only semi-retire, you might be offered a longer-term, but the lender will want to understand your pension arrangements. So expect to be asked about your pension during the mortgage interview.