What Do Mortgage Lenders Look For On Bank Statements?
Dan Miller4-Minute Read
March 23, 2022
If you are getting ready to buy a home, you may be wondering what mortgage lenders look for on bank statements. Nearly all mortgage lenders require you to provide several months of bank statements as part of the mortgage application process. What the lenders are looking for is a verification of the employment, income, assets and monthly debt payment information that you mentioned on your loan application.
Do Mortgage Lenders Need Bank Statements?
Nearly all mortgage lenders need bank statements when you submit a mortgage application. A bank statement will show not only your overall bank account balance but also a listing of your monthly transactions. The mortgage company will review 2 or 3 months of bank statements to make sure that your overall financial picture matches what you stated in your loan application.
For most borrowers, the easiest way to get your bank statements is to log on to your online account and either print them or save them as a PDF file. You’ll want to get bank statements for each of your checking and savings accounts you plan to use as part of the home buying process. Providing all of your bank statements upfront can speed up the mortgage application process.
What Do Mortgage Lenders Look For On Bank Statements?
Here is a list of some of the most important items that mortgage lenders are looking for when they review your bank statements. The loan underwriters will use this information to help determine whether you will be eligible for a loan.
- Monthly income: Verification of the amount and frequency of the pay from your employer.
- Monthly payments: Lenders will be looking to verify any recurring monthly payments that you mentioned on your loan application, as well as checking to see if there are any other payments that were not included.
- Expense history: For regular expenses, lenders will be looking through your bank statements to make sure that these expenses remain within reasonable limits.
- Cash reserves: In addition to showing your transactions, your bank statements will show your total bank balance. The lender will review your bank statements to make sure you have the assets to pay for your down payment and closing costs.
- Reasonable withdrawals: Any cash withdrawals should be regular and/or for relatively small amounts.
Lenders are also looking for items that could throw up a red flag. Some of these negative items include:
- Bounced checks/overdrafts: These can affect your credit score and do not show credit trustworthiness.
- Gifted funds/suspicious borrowed money: Lenders want to make sure that any down payment money is coming from your own assets and not gifted from other sources. You will be asked to explain any large deposits that appear on your bank statements.
- Questionable withdrawals: If you have large withdrawals on your bank statements, the underwriters may ask you to explain what they were for.
- New credit accounts: If you’re planning on applying for a mortgage, you should pause opening up any new credit accounts that will show up on your credit report. You should also hold off on any large purchases to keep your debt-to-income ratio down.
Why Do Lenders Need Bank Statements?
Mortgage companies or lenders use bank statements during the application process to verify your income, assets and eligibility for a loan. If you mentioned on your loan application that you are paid twice a month, the lender will want to see the direct deposits from your employer on your bank statements. The lender will also look at the debt payments you disclosed on your loan application and make sure they match up with any payments on your bank statements. Lenders ultimately review bank statements to make sure you have enough money to reliably make your monthly mortgage payments.
Another reason why lenders need bank statements relates to both down payments and closing costs. Lenders will review your bank statements to make sure that you have enough money to pay the down payment and closing costs that come with your loan. If your loan says that you will pay $40,000 as a down payment, the lender will want to see that $40,000 somewhere listed in your assets.
How Far Back Do Lenders Look At Bank Statements?
If you are wondering how far lenders look back at bank statements, it is fairly standard between different lenders. Generally speaking, lenders will ask for 2 months of bank statements. They will use the information on your bank statements to try and get a picture of your overall financial situation, and make sure that you have the income and assets to repay the loan that you are applying for.
The Bottom Line
As part of the mortgage loan application process, lenders will request to see two to three months of checking and savings account statements. The lender will review these bank statements to verify your income and expense history as stated on your loan application. They will also review your account balance information to make sure that you have sufficient liquid assets to pay for your down payment and closing costs. Providing bank statements is a normal part of the mortgage loan process, so make sure that you are prepared and that your bank statements verify the information that you stated on your loan application.
For more information, make sure to check out the personal finance section of Rocket HQSM to learn more about bank statements, bank accounts and other financial information needed for a mortgage.
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