Chris  Schmidt
Chris Schmidt
Owner/Broker

Do Mortgage Lenders Look at Spending Habits?

Wondering if mortgage lenders look at your spending habits? Unless you’re planning to buy a home with cash, then you’ll have to apply for a mortgage, where the lender will evaluate your finances in-depth. But does this include your spending habits?

In this post, Chris Schmidt and our Houston real estate experts at Your Home Sold Guaranteed Realty - Chris Schmidt Team will answer this question. 

Key Takeaways:

  • Lenders use your spending habits to get a sense of how you would handle new debt, see how responsible you are at paying off your existing debts, and analyze whether your financial situation is healthy overall.
  • To analyze your spending habits, lenders will request your bank statements and calculate your debt-to-income ratio. They’ll look at your debt-to-income ratio in relation to your spending.
  • Lenders prefer predictable spending habits, which indicate you live within your means and can responsibly manage debt. To this end, create a realistic budget and stick to it.

Be sure to read our comprehensive Mortgage Loan Process Guide

Do Mortgage Lenders Look at Spending Habits?

Yes, mortgage lenders look at your spending habits. In fact, your spending is a key consideration that helps the lender decide whether to approve or deny your loan application. 

Lenders use your spending habits to get a sense of how you would handle new debt, see how responsible you are at paying off your existing debts, and analyze whether your financial situation is healthy overall.

Signs of healthy spending habits are:

  • Consistently paying off your debts
  • Paying off your debts on time
  • Managing recurring payments responsibly
  • Keeping your credit usage low
  • Maintaining a steady balance of funds in your account despite deposits and withdrawals

To analyze your spending habits, lenders will request your bank statements and calculate your debt-to-income ratio. They’ll look at your debt-to-income ratio in relation to your spending.

What Are Red Flags for Lenders?

There are a few red flags lenders will look for:

  • Excessive Debt Payments: Many buyers think that paying off more debt than they need to demonstrates they’re proactive. However, lenders could interpret it as a sign that you’re overextended financially and may struggle to afford additional debt.
  • Overdrawing Your Account: Consistently overdrawing your bank account or having insufficient funds can be another sign of financial instability and lack of budgeting discipline. 
  • Large Deposits: Lenders may carefully scrutinize any large deposits into your bank accounts that are not from a verifiable source, as they may be seen as undisclosed loans or gifts that could affect your ability to afford a mortgage on your own means.

Lenders understand that everyone has different spending habits. However, it’s important to follow basic financial tips and maintain healthy spending habits if you want to get approved for a mortgage loan.

How Can You Improve Your Spending Habits?

If you want to improve your spending habits before applying for a loan, there are several steps you can take:

  • Contribute to Savings: Regular contributions to savings accounts, retirement funds, or emergency funds show that you prioritize financial stability and have a safety net for unexpected expenses.
  • Make Sure Spending is Stable: Predictable spending shows you live within your means and can responsibly manage debt. To this end, create a realistic budget and stick to it. Track your spending and identify any areas you can potentially cut expenses.
  • Use Credit Responsibly: Keep your credit card balances low relative to your credit limits. This demonstrates restraint and responsible credit usage.
  • Pay Down Debt: Focus on paying off high-interest debts to reduce your debt-to-income ratio and improve your overall financial health.
  • Avoid Major Purchases: Refrain from making significant purchases or taking on new debt in the months leading up to your mortgage application.
  • Be Transparent: Be honest and transparent with your lender about any unusual spending patterns or financial circumstances. Providing explanations for large transactions or financial challenges can help lenders better understand your financial situation.

We Can Help You Connect with the Top Mortgage Lenders

Your Home Sold Guaranteed Realty - Chris Schmidt Team. Do Mortgage Lenders Look at Spending Habits?
Chris Schmidt

Preparing your finances and spending habits is essential for a successful home purchase. If you need help figuring out where to start, consider working with a professional realtor and mortgage broker. At Your Home Sold Guaranteed Realty - Chris Schmidt Team Chris Schmidt and our team have years of experience working with home buyers in Houston when they are applying for a mortgage.

With access to 220+ lenders that have hundreds of loan products, these lenders compete for your business. Plus, our familiarity with the local market trends, as well as our legendary customer service, are why we’ve developed a reputation as the best realtor in Houston. In addition, we have connections with all the top lenders in the area and also provide unique buyer guarantees that make it risk-free to purchase a home.

When it comes to securing a mortgage, shopping around and comparing offers from different mortgage lenders can potentially save you thousands of dollars over the life of your loan. By taking the time to evaluate interest rates, fees, and overall costs, you can make an informed decision that aligns with your financial goals.

To learn more about working with our team, give us a call at 713-322-5604. You can also fill out the form on this page or send a message to [javascript protected email address].

To Discuss Your Home Sale or Purchase, Call or Text Today and Start Packing!