Congratulations on your newfound love for real estate! However, before you become engrossed in the thrill of open houses and bidding wars, it’s important to face the facts about your finances. Mortgage lenders examine your bank statements closely, much like financial investigators, looking for hints about your financial well-being. And believe us when we say that they are searching for warning signs that could dash your hopes of becoming homeowners rather than for hidden treasure.
So, what exactly are mortgage lenders looking for in your bank statements?
1. Enough Dough for the Down Payment and Closing Costs:
Lenders want to see you’ve got the cash to cover the down payment and closing costs, not relying on last-minute loans or shady sources. Think of it as proving you’re serious about buying a home, not just window-shopping.
2. A Steady Stream of Income:
Your bank statements ought to demonstrate a steady stream of revenue from dependable sources, such as regular paychecks. This gives lenders confidence that you can easily manage your monthly mortgage payments.
3, Responsible Money Management:
Lenders want to see you’re not living paycheck to paycheck, juggling overdrafts, or drowning in debt. They’re looking for evidence of financial stability, someone who can manage their money wisely and handle the responsibility of a mortgage.
Now, let’s dive into the three things that might make mortgage lenders raise their eyebrows:
1. Bounced Checks and NSF Fees:
These are like flashing neon signs screaming, “Financial mismanagement!” Lenders see them as a sign you struggle to manage your money, making you a risky borrower.
2. Large, Unexplained Deposits:
Sudden windfalls without a clear origin can raise suspicion. Lenders want to make sure that your down payment isn’t coming from dubious loans or illicit activities.
3. Regular Payments to Unknown Accounts:
Your ability to repay the mortgage may be affected if your statements show that you regularly make payments to accounts that you did not mention on your application. This could be a sign of unreported debt or other financial obligations.
But wait, there’s more!
Even if you think you’ve got your bank statements in tip-top shape, remember these additional tips:
- Avoid large unexplained deposits: Wait 60 days after receiving such deposits before applying for a mortgage. This allows the funds to become “seasoned” and appear legitimate to lenders.
- Be transparent about all income sources: Don’t try to hide income sources, even if they’re unconventional. Explain them clearly to avoid raising red flags.
- Double-check your statements before submitting them: Ensure there are no discrepancies or suspicious activity that could raise questions from your lender.
Remember, honesty is the best policy. By being upfront and transparent about your finances, you’ll build trust with your lender and increase your chances of securing that dream home.
Still have questions?
Here are some answers to frequently asked questions about mortgage bank statements:
- How many bank statements do I need? Typically, lenders require two months’ worth of statements.
- Do I have to disclose all bank accounts? Yes, if the account holds funds you’ll use to qualify for the mortgage.
- What are “sourced and seasoned” funds? These are funds with a verifiable source and have been in your account for at least 60 days.
- Why would an underwriter deny a loan? Insufficient credit, high debt-to-income ratio, and unexplained sources of funds are common reasons.
Ready to embark on your homeownership journey?
Let us help you find the right mortgage and navigate the world of bank statements with confidence. Remember, a little preparation and transparency can go a long way in securing your dream home.
What do mortgage lenders look for on bank statements?
Lenders review your bank statements when you apply for a mortgage in order to confirm that you have the funds available for the down payment, closing costs, and ongoing mortgage payments. And the more straightforward your application file, the more likely you are to be approved. Even if unintentionally, you certainly don’t want to raise any red flags.
Read on to learn how you can avoid common underwriting pitfalls and optimize your chances of mortgage approval.
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Regular payments, irregular activities
Monthly payments on bank statements that don’t match a credit account that you disclosed on your mortgage application are another item to be wary of.
Typically, your credit report will pull in your credit cards, auto loans, student loans, and other debt accounts. But some creditors don’t report to the major credit bureaus, such as Equifax or Experian.
For example, the debt details associated with a private, personal, or business loan obtained from an individual rather than a financial institution might not show up on your credit report.
But your bank statement’s automatic $300 monthly payment will probably notify the lender that you have a credit account that isn’t disclosed.
What NOT to tell your LENDER when applying for a MORTGAGE LOAN
FAQ
What happens if you make a large payment on your mortgage?
Do mortgage companies report payments to IRS?
What happens if I pay an extra $1000 a month on my mortgage?
What happens if I pay an extra $400 a month on my mortgage?
Do I have to report my mortgage payments to credit bureaus?
In general, a lender is not required to report payments you make on your mortgage to any of the three credit bureaus. If the lender does report your payments, it must report them accurately and timely. The lender also must respond to any credit disputes.
Can a mortgage servicer send negative information to a credit reporting company?
If you report an error to your servicer related to a mortgage payment, your servicer is not allowed to send negative information to a credit reporting company regarding that payment for 60 days after receiving your notice of the error. Mortgage servicers have to set up their business so they can find correct information about your loan.
Are You struggling to make your mortgage payments?
A recent report revealed numerous violations of consumer protection laws, including those put in place to help families impacted by the financial crisis. If you’re still struggling to make your mortgage payments, you’re not alone. It’s important to know, though, that you have rights and options.
Why do Lenders look at bank statements when applying for a mortgage?
When you apply for a mortgage, lenders look at your bank statements to verify that you can afford the down payment, closing costs, and future mortgage payments. And the more straightforward your application file, the more likely you are to be approved. Even if unintentionally, you certainly don’t want to raise any red flags.