Bank Statements

How Underwriters Analyze Bank Statements

Gustan Cho Associates

If you are applying for a mortgage loan application, one of the most important things a mortgage loan underwriter will require is bank statements.  Two months of bank statements is required and the mortgage loan underwriter will closely analyze your bank statements.  The mortgage loan underwriter will look for regular deposits, irregular deposits, large deposits, and overdrafts.  Many folks have multiple bank statements.  Just because you have multiple bank statements, you do not have to provide all of your bank statements.  When a mortgage loan underwriter request 60 days of bank statements, he is not requesting all of your bank accounts.  The only bank statement or bank statements you need to provide is the bank statement or bank statements that has the sourced down payment and/or closing costs seasoned in it.  For example, if you need $3,500 for the down payment and you have three bank accounts as follows: $2,000 in bank account A, $1,500 in bank account B, and $300.00 in bank account C, you just need to provide bank accounts A and bank accounts B and not submit bank account C.  If you have 12 bank accounts and you have money in all of the bank accounts, you can just provide one bank account with sufficient funds that you need for your down payment and closing costs.  If you provide all of your bank accounts, all bank account statements that you provide the mortgage loan underwriter will be analyzed.

Regular Deposits In Bank Statements

One of the things that a mortgage loan underwriter will analyze is regular deposits.  For example, if you have your regular payroll check automated deposited electronically to your bank account every other week, that will be looked at.  The mortgage loan underwriter will look at the electronic deposit and notice it will be your payroll check being electronically deposited by your employer’s payroll service and that is okay.  If there are other regular deposits on a regular basis to your bank account, whether it is electronically or you make a deposit at the bank, the mortgage loan underwriter will ask and question what the source of the deposit is.  If you have a part time job that is being cash by your employer and you deposit that cash, that cash deposit cannot be used.  Cash in the mortgage world cannot be used as sourced funds.  However, if you have regular deposits from a regular part time job and you can provide the copy of a check and deposit slip, that regular deposit can be used to source funds in your bank account.  Even though you get regular deposits to your bank account, the regular deposits needs to be sourced.  Another example is when you are getting regular child support payments or alimony payments being deposited regularly to your bank account.  The mortgage loan underwriter will want you to provide documentation of the deposit transactions and the terms.

Irregular Deposits In Bank Statements

Irregular deposits is when there could be trouble.  Irregular deposits are allowed but any irregular deposit over $200 will be questioned and proof of source will be required in order for the mortgage loan underwriter to count it as part of your assets.  If irregular deposits cannot be sourced because it was a cash deposit from a gift from a family member, that cash deposit cannot be used as part of your assets.  Its okay for you to make irregular deposits that has not been sourced but you cannot use it as part of the funds available to use towards your down payment if the irregular non-sourced deposit has been made within the 60 days.  Any deposits, whether they are irregular deposits or large deposits, that are older than 60 days does not matter since the mortgage lender only requires 60 days of bank statements.

Sourcing Irregular And Large Deposits In Bank Statements

Irregular deposits and large deposits in your bank statement can be used as long as it can be sourced.  For example, if you have a large $10,000 deposit in the past sixty days and that large deposit came from the sale of a second home, that $10,000 deposit can be used as long as you can provide the copy of the HUD settlement statement from the sale of your second home as well as the deposit slip and/or wire confirmation going to your bank account.  If you sell a large ticket item such as a car, motorcycle, RV, boat, you need to provide the copy of the bill of sale, copy of check, and the deposit slip.

Withdrawals From Bank Statements

Mortgage lenders do not care about withdrawals from your bank statements.  There are no explanations needed for any withdrawals, whether they are small withdrawals and/or larger withdrawals.  However, any and all withdrawals will offset your positive assets.  Automatic monthly withdrawals can be used to prove rental verification and other monthly payments that a mortgage loan underwriter may request that the mortgage loan applicant is paying his or her bills on time.  Withdrawals are required by mortgage lenders to verify that the earnest money check has cleared.

Gift Funds

Gift funds are allowed to be used for down payment and closing costs.  In order for gift funds to be used, the donor of the gift funds needs to be a family member and/or relative of the home buyer.  A gift letter by the donor needs to be signed certifying that the gift funds is not a loan and a gift and that the gift funds will not be paid back by the home buyer.  The donor needs to provide a 30 days bank statement showing that the gift funds has been seasoned for at least 30 days.  The gift funds leaving the donor’s account and being deposited into the recipient’s bank account needs to be provided.  Leaving the donor’s bank account is reflected on the donor’s bank statement.  Being deposited into the recipient’s bank account can be provided by the copy of the check and a deposit slip from the recipient.

Overdrafts: Overdrafts In Bank Statements Can Be Deal Breaker

Overdrafts can be a deal breaker for any mortgage loan applicant.  Mortgage lenders do not want to see any overdrafts from mortgage loan applicants in the past 12 months PERIOD!  Whether it is a $10 dollar overdraft or a $1,000 overdraft, an overdraft is an overdraft under the eyes of a mortgage loan underwriter.  If you have multiple bank accounts and have some bank accounts with overdrafts, you cannot submit the bank statements with overdrafts.  There are solutions to solve the bank statement overdraft problem.

Solution To Bank Statements With Overdrafts

Mortgage lenders require you to only provide 60 days of bank statements.  What if you did not have any overdrafts in the past 60 days in your bank statements but you had overdrafts prior to the 60 days?  When you provide your actual bank statements for the past 60 days and there are no bank overdrafts but if you did have overdrafts prior to the 60 days, there is a column in your bank statements that lists year-to-date overdraft fees.  This will alert the mortgage loan underwriter that you have bank overdrafts in the past 12 months.  If this is the case, you cannot provide your actual bank statements.  What you need to do is go to your bank and get 60 days of bank statement printouts.  On bank statement printouts, there are no year-to-date overdraft fees column.  A print out of your bank statements can be used in lieu of your actual original bank statements that is mailed to you.  If you have had bank overdrafts in the past 12 months, go to your bank and get 60 days of bank printouts and get those printouts signed, dated, and stamped by the bank teller.

If you had recent overdrafts and you do not have any other bank accounts without overdrafts, then the only solution is for you to wait sixty days and let the overdrafts season for 60 days.

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The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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