The lender will go through the list of transactions and look closely for any bounced direct debits or standing orders. Income in (opening balance) compared to the expenditure (closing balance) to see if you are living within your means and are in the position to take on the added commitment of a mortgage.

The lender will also evaluate whether your social life, travel or holidaying is above average and whether you have an excessive gambling habit.

Most lenders will still lend if you enter an ‘agreed’ overdraft facility provided this can be evidenced (most bank statements specify the overdraft amount on them if not a letter from the bank would suffice). Lenders will have greater understanding if this is a seasonal event such as Christmas and would be less tolerant if this a continual feature as it gives the impression you are living beyond your means. Being in an overdraft will also have a bearing on your credit score rating (computerised point system designed to rate your chances of repaying credit) which depending on the lender may result in your mortgage application being declined.

There are some lenders that do not have a ‘credit scoring’ policy preferring to let an underwriter make a decision and also a few lenders that would entertain you exceeding the overdraft limit. If you have had experienced these difficulties an expert mortgage broker such as Niche Advice should be able to guide you further.

The lender will use the bank statements to see the magnitude of your debt (such as personal loans, hire purchase, secured loans, credit cards, charge cards etc) and assess the payment conduct. It is common for applicants to understate their debt position on a mortgage application form only to be found out when the bank statements have been provided. Non-disclosure is frowned upon, and can lead to the mortgage application being rejected, so it is therefore imperative that your bank statements are checked thoroughly and credit commitments reflected properly in the form.

Student loans, maintenance payments, child care, education fees, social memberships, rent, insurances, pension contributions, property service charges can all be laid bare and factored in by the lender in their affordability assessment.

If there is a large deposit in your account (circa £1,000 or more), and this is clearly not related to your job, then the lender is likely to any for an explanation. Why? Well they have a duty of care to the Money Laundering Regulations and as such need to account for the origination of ALL the deposit proceeds used to purchase the property. The same steps would apply it there a series of smaller undeterminable credits.

The lender will normally look for utility bills, driving licences and at the voters roll to evidence where you live, however, the bank statement can provide another source of verification to give them additional comfort.

This is often an area of documentation that can lead to frustration. Lenders’ are extremely picky on the format of the bank statements.

The ‘old fashioned’ paper statements are normally preferred by lenders as they can quickly tell whether they are the genuine article. Applicants may understandably have a reluctance to part with original documents but the lender should be able to return these once the mortgage process has been completed.

Many of the Lenders are of course banks themselves and appreciate that times have moved on to an online paperless world, and as such they will accept statements produced directly from your bank’s website provided they are in a prescribed format. Here are the key format guidelines for the statements below: