In order to obtain a loan, borrowers who want to buy or refinance a home must be approved by a lender. Banks must confirm the borrower’s financial details and might ask for the completion and mailing of a proof of deposit/verification of deposit (POD/VOD) form to the borrower’s bank. The borrower may be required to provide the mortgage lender with at least two months’ worth of bank statements as a proof of deposit.
In the realm of personal finance a common question arises: can banks peek into your accounts at other financial institutions? The answer like many things in finance, is nuanced.
A Glimpse into the World of Bank Visibility
Generally banks cannot directly access your accounts at other banks without your explicit permission. However, there are a few situations where they might gain some insights:
- Account Aggregation: Some banks offer account aggregation services, allowing you to connect accounts from other institutions within their platform. This provides a consolidated view of your finances but requires your active consent and login credentials.
- Credit Reporting: When you apply for a loan or credit card, the bank may request your permission to access your credit report. This report includes information about your credit history, including accounts you hold at other institutions.
- Joint Accounts: If you have a joint account with someone at another bank, the bank may be able to see transactions related to that account.
- Data Sharing Agreements: In some cases, banks may have data-sharing agreements with other institutions. These agreements allow them to exchange limited information for specific purposes, such as fraud prevention.
Understanding the Limits of Bank Visibility
It’s important to remember that even with these exceptions, banks cannot see the full details of your accounts at other institutions. They may only see limited information, such as account balances or transaction history. Additionally, you have the right to opt out of data sharing agreements and limit the information banks can access.
Protecting Your Financial Privacy
Here are some actions you can take if you’re worried about banks seeing your other bank accounts:
- Review your bank’s privacy policy: Understand how your bank handles your personal information and what data they share with third parties.
- Opt out of data sharing: Many banks allow you to opt out of sharing your information with third parties. Check your account settings or contact your bank directly to learn more.
- Use separate accounts: Consider keeping your everyday spending and savings accounts separate from accounts you use for specific purposes, such as investments or large purchases.
- Monitor your accounts regularly: Regularly review your account statements and online banking activity to detect any unauthorized access or suspicious activity.
The Bottom Line: Transparency and Control
Although banks might have restricted access to your accounts at other institutions, it’s crucial to keep in mind that you maintain authority over your financial privacy. Knowing how banks access and utilize your information will help you make wise decisions about data protection and efficient money management.
Types of Financial Information Verified
A lender that submits a VOD form to a bank receives confirmation of the loan applicant’s financial information. While bank-to-bank requirements can differ, the following are some of the most typical categories of data needed for bank statement verification:
- Account number
- Type of account: certificate of deposit (CD), savings, individual retirement account (IRA), or checking
- Open or closed status and open date
- Names of account holders, or authorized signers on the account
- Balance details, encompassing both the current balance and the average balance history for the previous two statement periods
- Interest paid over the last two statement periods, as well as the current interest rate (if applicable)
- The date of account closure and, if relevant, the balance at that time
- The bank may request information about the term, interest rate, amount of interest paid, and any early withdrawal penalties if it’s a savings account or certificate of deposit.
If the financial information is insufficient to meet the requirements for verification, a lender may decline to finance a mortgage or permit the prospective buyer to use the funds from the account for the mortgage and closing costs.
Understanding How Lenders Verify Bank Statements
Loans are underwritten by banks and mortgage lenders using a range of factors, such as the borrower’s creditworthiness, assets, savings, and income. When buying a home, the mortgage lender may ask the borrower for proof of deposit. The lender must confirm that the money needed to buy the house has been saved in a bank account and is readily available to the lender.
A proof of deposit is evidence that money has been deposited or has accumulated in a bank account. A proof of deposit is used by a mortgage company or lender to assess if a borrower has saved enough money for the down payment on the house they are interested in buying.
For example, in a typical mortgage, a borrower might put 20% down towards the purchase of a home. If its a $100,000 home, the borrower would have to put down $20,000 upfront. In order to confirm that the borrower truly has $20,000 in their bank account for the down payment, the mortgage lender would use a proof of deposit. Additionally, the lender must guarantee that there are sufficient funds available to cover the closing costs related to a new mortgage. Closing costs are additional costs that can include appraisal fees, taxes, title searches, title insurance, and deed-recording fees. A mortgage calculator can show you the impact of different rates on your monthly payment.
Usually, the borrower gives the bank or mortgage company two of their most recent bank statements. The company then gets in touch with the borrower’s bank to confirm the details.
Checking and Savings 101 – (Bank Accounts 1/2)
FAQ
Do banks know you have other bank accounts?
Can banks see if you owe other banks?
Do banks communicate with each other?
Can a bank share information with another bank?
Can a bank see my other bank account?
Part of their background check may require you to furnish the bank with bank statements from your other bank accounts along with a history of your balances and transactions. Can bank see my other bank account? Be cautious about making your bank account information available to other people.
Should I Keep my checking account at a different bank?
Having your checking account (and emergency savings) at a different bank than where you keep your long-term savings accounts can help you stay on track with your savings goals. By keeping your savings account at a different bank, your funds will be less easily accessible and encourage you to avoid touching it, so your money can grow.
Can I link my checking and savings accounts at the same bank?
If your checking and savings accounts are at the same bank, they are often linked automatically, making it easy to transfer money instantly. If you want to link accounts at two different banks, the transfer may take a day or two to complete. Follow the steps below to link your bank account with another financial institution or a third-party app:
Do I need a bank branch to transfer money?
You won’t need to visit a bank branch or write checks, and in many cases, it’s free to move funds electronically. Whether you want to set up an automatic savings plan into a linked savings account at a different bank or move your PayPal funds to your bank account, setting up a link to your regular bank account is pretty simple.