Using an overdraft facility provided by your bank is an excellent choice, especially during emergencies. Usage of this facility helps you manage your account when necessary.

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However, when you plan to buy a house with a mortgage, you would get worried. You would take into consideration any factors that can increase your chances of getting a mortgage approved. Hence, you would want to find out, “does being in overdraft affect mortgage application?”

Here’s the answer

Yes, being in overdraft does affect mortgage application to some extent. But there’s nothing to worry about if you tick all the boxes of the mortgage application.

Before we learn about those factors, there is certainly stuff that the lenders would check. And that includes your income, affordability, credit score, debt-to-income ratio, employment history, and so on.

If you are doing great in these areas, your overdraft won’t affect your mortgage application. However, if you have a higher debt-to-income as well as a lower credit score, your overdraft would be taken into account. That said, here are some of the factors related to overdraft that affect mortgage applications.

Recent Overdraft

If you have recently used the overdraft facility, it can affect your mortgage application. That is because your lender would think of this situation as your inability to pay the amount yourself.

Not utilizing overdraft facility

On the flip side, if you haven’t touched the overdraft facility, you’re good to go. That is because it would show that you have financially stable to take care of your expenses yourself. Hence, even though you’re being in overdraft, it wouldn’t affect your mortgage application.

Large overdraft Limit

The larger the overdraft limit, the more negative effects it would have on your mortgage application. After all, the overdraft is a loan. Hence, your lender would take this into account, and your mortgage application can be affected.