Bank Statements and Mortgage Lenders: A Comprehensive Guide
Many things about the homebuying process can be stressful, but I bet no one ever thought that collecting bank statements could be one of them. It turns out that collecting 60 days of bank statements can turn out to be a nightmare if you don’t understand why bank statements are needed, how to collect your bank statements and some of the tiny details that can cause your bank statement to be rejected by lender underwriters.
Understanding the Need for Bank Statements in Mortgage Lending
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 (not borrowed).
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.
Understanding Large Deposits and Bank Statement Requirements
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 can’t 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.
What will underwriters consider as an acceptable bank statement doc?
Online banking has made it easier than ever to track your spending, deposit money, pay bills, and even deposit checks. When it comes to collecting bank statements for your loan, underwriters are very particular about what they will accept. The best thing you can provide is an actual bank statement, the statement you receive at the end of every cycle. At the beginning of your process, you should always submit 60 days of actual bank statements to your loan officer.
What happens when you need to verify your deposit check cleared or show proof of funds to close and an actual bank statement hasn’t dropped for that cycle yet? You can provide transaction history. Here is where things get tricky. Although online banking makes it easier to print your transactions it does not necessarily provide enough information to verify that the account is yours, or printed from your online application. It may sound silly but an underwriter needs the URL at the bottom of the statement, it needs to be able to be linked to you, and they need to verify the financial institution.
Most bank statements do not provide all of this information on transaction history and it can cause a lot of frustration. A lender will accept a transaction history without this information as long as it is stamped and signed on all pages by a bank employee.
A lender will accept a transaction history without this information as long as it is stamped and signed on all pages by a bank employee.
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