Why Do We Need Bank Statements
The lender collects bank statements for several reasons. Most importantly they collect bank statements to verify that you have enough funds in your account to cover your closing costs. Most loan programs require 60 days of consecutive bank statements to verify cash to close. They are checking to see that you have the funds available to cover the entirety of your closing costs, making sure you have not had any large deposits and making sure the funds are in fact your own .
They also collect statements to verify that your deposit check on a home, also known as earnest money, has cleared your account. Always be prepared to provide a copy of your deposit check as well as updated statements showing the deposit cleared your account in order to receive credit for it. Your real estate agent most likely will have a copy of the check on file.
What Do Mortgage Lenders Look For On Bank Statements
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 loan payments.
Youre much more likely to get approved if your bank statements are clear of anything questionable.
Red-flag issues for mortgage underwriters include:
Fortunately, you can fix a lot of issues before they become, well, issues. Heres what to look for, and how to deal with problems you find.
Can I Be Denied A Mortgage Due To Overdrafts
Bank account overdrafts rarely result in a mortgage application being declined for otherwise qualified applicants. According to mortgage lender guidelines, if your bank account statements demonstrate overdraft activity, that information suggests a weakness in the borrowers ability to meet financial obligations.
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What Constitutes A Large Deposit
Large deposits to your bank account will be scrutinized by the underwriters. But, what constitutes a large deposit? It depends on your loan program, loan amount, and your income. An underwriter is going to view your entire loan application to determine which amount you may need to verify a deposit over.
Consider if you have just enough available in your checking account to cover your funds to close and not much wiggle room. An underwriter can require you to verify a deposit of just $100!! You need to always be careful depositing cash while you are going through the loan process. A cash deposit no matter how small can cause an underwriter to request you to source the deposit. Any deposits that are obvious like payroll, social security, and retirement most likely will not need to be sourced.
Sourcing, simply put, is showing evidence of where the money came from. A deposit can be difficult if it is cash or a personal check or money order. If you are not able to source a deposit to the underwriters liking they can remove the deposit out of your total funds they have approved for closing. In other words, if you cant source a $500 deposit the underwriters may not allow you to use it for closing costs leaving you $500 dollars short.
Always check with your loan officer before depositing anything out of the ordinary into your account during the loan process, they will be able to help you determine if this will hurt your loan or it is safe to deposit.
Bank Statement Loans Lenders Programs And Requirements
Self employed borrowers, as well as those who earn seasonal income, may be eligible to qualify for a bank statement loan program. Bank statement loans allow you to use your bank statements to verify income instead of tax returns. These programs are utilized by a wide range of self-employed professionals, including small business owners, freelancers, independent contractors, and many other types of self-employed people.
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Dipping Into Your Overdraft
Lenders wont be too happy if you are always dipping into your overdraft. If you are only using it every few months or so, your lender may be more lenient, however, if its every single month, your chances of being accepted for a mortgage may be lowered. If you are exceeding your overdraft limit on a regular basis, lenders may not take it lightly and could even be put off.As we mentioned before, lenders dont take gambling transactions very well, especially if they come in large numbers. If you are dipping in and out of your overdraft because of gambling, lenders may have little interest in your application. Having a combination of the two leading factors to why lenders can sometimes turn away applications on your bank statements unfortunately never ends well.
Is A Bank Statementthe Same As Transaction History
Its important to note that a bank statement is different from your transaction history. A bank statement is a list of transactions made within any given period . Generally, you will be able to download this as a CSV file to send off.
Its important to note that most lenders want to see both bank statements and your transaction history.
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A Bank Vod Wont Solve All Bank Statement Issues
Verifications of Deposit, or VODs, are forms that lenders can use in lieu of bank statements. You sign an authorization allowing your banking institution to hand-complete the form, which indicates the account owner and its current balance.
VODs have been used to get around bank statement rules for years. But dont count on them to solve the above-mentioned issues.
First, the lender can request an actual bank statement and disregard the VOD, if it suspects potential issues.
Second, depositories are also required to list the accounts average balance. Thats likely to expose recent large deposits.
For instance, if the current balance is $10,000 and the two-month average balance is $2,000, there was probably a very recent and substantial deposit.
In addition, theres a field in which the bank is asked to include any additional information which may be of assistance in determination of creditworthiness.
Thats where your NSFs might be listed.
There are good reasons to double-check your bank statements and your application before sending them to your lender. The bottom line is that you dont just want to be honest you want to avoid appearing dishonest.
Your lender wont turn a blind eye to anything it finds suspicious.
Whats On The Asset Statement
The main reasons lenders request copies of your asset statements is:
Making sure you have the money to complete the transaction, known as cash to close, happens at the beginning of the loan process. You should have all the funds when you apply, or be able to detail where the funds will be originating. If part of your cash to close is a gift from a family member or a bonus or commission you expect before closing, communicate the details to the lender upfront. The rest of the money should already be in your accounts.
The lender will review where your money came from, known as Sourcing. Bank statements typically identify the source of all deposits on the statement, with few exceptions. When your paycheck is direct deposited into your account, your employer is identified as the source on the statements.
If you have generic deposits from multiple checks and cash, the statements wont be enough to prove the source of the money. You can provide copies of the item that make up a generic deposit when you give your lender the statements or wait for them to request the documents. Note that in most cases, youll only need to source deposits that represent more than 25% of your monthly qualifying income.
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How To Make Sure Your First Mortgage Application Gets Approved
GETTING the funds together for a deposit is one thing, but actually getting approved for a mortgage is another.
Here are some tips you can follow to make sure your application gets approved first time:
Work out how much you can afford – Lenders reject unrealistic mortgage applications and that in turn will damage your credit score and make you worse off. The most you’ll be able to borrow is four and a half times your yearly salary, which will give you some idea of your budget.
Take advantage of a scheme – Help To Buy ISA, Help To Buy equity loan and Shared Ownership are just some of the schemes the government is running for first-time buyers.
Check your credit score – If you’ve got a bad credit history then you’re going to be rejected for a mortgage, which will only make your score worse, so it’s worth checking before you apply.
Consider using a broker– A broker will be able to review a wider range of products and advise you on the right one for your circumstances. Remember though, they’ll take a fee for their services so you’ll need to factor that in to your costs. Digital mortgage brokers like Trussle and Habito are free to use though because they take a cut from the lender, not the borrower.
Save for a larger deposit – The more money you have, the less money you’ll need to borrow and the more attractive you are to a lender.
Santander sent an email to brokers specifically asking them not to send borrower’s bank statements unless they ask for them.
What Do Mortgage Advisors Look For On Bank Statements
When underwriters look at your bank statements, they want to see that you have enough money to cover your down payment and closing costs. Some loan types require a few months worth of mortgage payments left over in the account for emergency reserves. In other words, the upfront costs cant drain your account.
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Current Mortgage Interest Rates
When you are looking at purchase or refinance quotes, you will see mortgage interest rates come up with your results. The interest rate you are given depends on your credit score as well as the current state of the economy and housing market. Benzinga updates our current mortgage rates regularly to reflect the most recent data.
Monthly Savings Of The Applicant
Scrutinising the Statements gives the Bankers an Idea about the Financial Soundness of the Applicant. From these statements the Bankers try to have an idea about the Monthly Expenses & Saving Habits of the Applicant. These are necessary to ensure that the Applicant is Credit Worthy and would be able to repay pay the Loan Instalments on time.
It also helps the Bankers in assessing how much Net Income is credited to the account of the Individual every month, on the basis of which the Loan Eligibility is determined.
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Activities To Avoid Between Mortgage Pre
This is a guest post by Blair Warner, senior credit consultant and founder of Upgrade My Credit
You’ve just found out you’ve been pre-approved for a home loan!
That’s great news! Whether you’ve found a home you want to buy or you’re still out there house shopping, there’s something you need to know now that you’ve secured the financial backing of a lender: it’s important to keep your credit in good standing from now until closing day. What does that mean, exactly? Follow our tips below to learn more:
When Do You Need A Bank Statement To Buy A Home
Youve read correctly. Most lenders will request your bank statements when you apply for a mortgage to buy a home. Homeowners who are refinancing an existing loan might not have to provide copies of their bank statements. But they are almost always required for purchase loans, which is the situation youre in.
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How To Get Your Bank Statements From Bankwest
Bank statements:
1. Log in to Bankwest Online Banking via the orange log in button at the top right of the homepage.
2. Enter your person access number and password. Contact the bank if you do not know these.
3. Click Self service then Statement options.
4. Select the Online option then click Next to confirm. You will now be able to view this statement.
Transaction history:
1. Log in to Bankwest Online Banking via the orange log in button at the top right of the homepage.
2. Click Transaction search on the left-hand column. You will be able to filter your search by account and date range.
3. Use the printer feature on your internet browser to download via the Print to PDF option under available printers.
Maintaining A Clean Bank Statement
How many months
When applying for a loan, we will request two months bank statements. We will ask for all pages, including the junk pages. If your statement says page 1 of 4, then we will require all 4 of the pages. Online statements are acceptable but screenshots are not.
Multiple account holders
Is your bank account held jointly? Is there somebody listed on the account that is not on the loan you are applying for? If so, well need a joint access letter from the other account holder stating that you has 100% access to all funds in the account.
Transfers from other accounts
The best thing you can do is limit the transfers. Any account you are transferring money from will have to be verified, especially if the transfers are large*. If you introduce another account, well need two months of that statement. If you have large transfers into this new account, well need to verify where those funds came from as well. The best thing you can do is limit the transfers over a 60 day period. *More on large deposits below.
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Angel Oak Mortgage Services
Angel Oak offers a 24 month bank statement program, which allows you to use both your personal and business bank statement accounts.
Details of Angel Oaks Bank Statement Program:
- Loan amounts are available from $150,000-$3,000,000.
- Up to a 85% LTV with no MI.
- 2 years of self-employment required.
- Available for owner occupied and investment properties.
- 4 years seasoning after a bankruptcy, foreclosure, or short sale.
- They offer these loans in the following states: AL, AZ, CA, CO, CT, DE, DC, FL, GA, IL, IN, IA, KS, KY, LA, MD, MI, MN, MS, NJ, NV, NC, OK, OH, OR, PA, SC, TN, TX, UT, VA, WA and WI.
Cross Country Mortgage offers a 24 month bank statement .
Details of Cross Countrys Bank Statement Program:
- Loan amounts are available up to $2,000,000.
- They do not have a set minimum credit score, but require good or excellent credit.
- The highest LTV allowed is 80%.
- DTI ratios up to 50%.
- Available for owner occupied, investment properties, and second homes.
- They offer these loans in the following states: AL, AK, AR, AZ, CA, CO, CT, DC, DE, FL, GA, HI, ID, IA, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, VT, WA, WI, WV, and WY.
Do Lenders Look At Bank Statements Before Closing
Lenders typically will not re-checkyour bank statements right before closing. Theyre only required when youinitially apply and go through underwriting.
However, there are a few things yourlender will re-check before closing, including:
- Employment and income
You should avoid financing any largepurchases or opening new credit lines between mortgageapproval and closing.
New debts can affect your credit score as well as your debt-to-income ratio , and could seriously affect your loan approval and interest rate.
In addition, if anything changeswith your income or employment prior to closing, let your lender knowimmediately so it can decide whether this will impact your loan approval andhelp you understand how to proceed.
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What Do Mortgage Lenders Look For In Bank Statements
When you take out a mortgage to buy a home, the lender needs to make sure your chances of defaulting are low. A lender will ask for a lot of information to get an idea of your financial situation and whether youre a safe bet, including your employment and income records and existing loans.
One of the things you will need to hand over with your application is your bank statements – a summary record of the money that flows in and out of your bank account.
Why do mortgage lenders need bank statements? Because lenders want to know your past financial behaviour, so they can be confident that you will be able to pay your mortgage instalments on time.
Here’s what a lender may pay closer attention to when looking at your bank statements:
Before you apply for a loan, its good practice to set up habits that show lenders youre a responsible choice.
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Jodie Humphries
Personal Finance Editor
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