Bank Statements In The Mortgage Process Underwriting Guidelines

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This BLOG On Bank Statements In The Mortgage Process Underwriting Guidelines Was UPDATED And PUBLISHED On February 8th, 2020

Bank Statements In The Mortgage Process Underwriting Guidelines

Bank statements during the mortgage process will be thoroughly scrutinized by the underwriter.

  • Lenders want two months worth of bank statements
  • Any irregular deposits outside of payroll check deposits will need to be sourced and explained
  • In the event, if deposits over $200 dollars cannot be sourced
  • It cannot be used towards asset calculations
  • Mortgage lenders also do not want any bank overdrafts in the past 12 months
  • Even a $5 dollar overdraft can be a deal killer
  • Borrowers with multiple bank accounts and transferring funds from one account to another, all Bank Statements In The Mortgage Process need to be used
  • Mortgage lenders also want to see down payment funds seasoned in the borrower’s bank account

In this article, we will discuss and cover the importance of bank statements during the mortgage process.

Irregular And Large Deposits In Bank Statements In The Mortgage Process

Borrowers with irregular deposits or large deposits showing in Bank Statements In The Mortgage Process, those irregular items need to be sourced.

  • Underwriters will want proof where the irregular or large deposit came from
  • The source needs to be provided
  • Regular deposits like payroll checks can easily be explained
  • But extraordinary deposits needs to be explained and proof needs to be provided
  • For example, if there is a large deposit from the sale of a car, borrowers need to provide the bill sale, copy of the check, and copy of deposit slip plus a letter of explanation
  • If borrowers are getting a gift for the down payment, they need to provide a gift letter from the donor
  • The gift letter, provided by the lender, will state that the gift is only a gift and that it does not need to be paid back
  • The paper trail of gift funds transferring from the donor’s account into borrowers account needs to be provided
  • Also, 30-day bank statement from the donor showing that the funds have been seasoned needs to be provided to the lender

Remember lenders only require to see 60 days worth of bank statements.

Funds That Cannot Be Sourced

Funds That Cannot Be Sourced

There are borrowers who have mattress money ( cash in hand ).

  • Cash is non-existent in the mortgage business
  • However, they can deposit cash in their bank account and let that cash season for at least 60 days
  • Borrowers who let cash season for 60 days in their bank account can use the cash towards their down payment on their home purchase

Lenders will not ask any questions on bank balance for longer than 60 days.

  • Undocumented cash is nonexistent in the mortgage business and cannot be used for mortgage qualification
  • Borrowers who have a substantial amount of cash and cannot source the cash, there is a solution
  • Need to make the cash deposit in the bank account as soon as possible and wait 60 days
  • After cash has been seasoned in the bank account for 60 days, sourcing it is not necessary since mortgage lenders only require 60 days of bank statements
  • Same with a gift from a donor

If the gift funds have been given to the borrower and 60 days have elapsed, there is no gift letter required or sourcing required.

What Happens If I Have Overdrafts In Past 12 Months?

Mortgage lenders do not want to see any bank overdrafts in the past 12 months.

  • Multiple bank overdrafts will definitely be deal killers
  • Borrowers with one or two overdrafts and have a very good excuse, maybe a detailed letter of explanation can cure the problem
  • But overdrafts month after month will cause a mortgage denial in a heartbeat
  • Guaranteed!!!! 
  • Mortgage Underwriters view bank overdrafts as financial irresponsibility
  • Lenders take overdrafts extremely seriously
  • Lenders want to only see 60 days of bank statements

Solutions To Overdrafts In Past 12 Months

Solutions To Overdrafts In Past 12 Months

So if a person had an overdraft 6 months ago and the lender only wants to see 2 months bank statements, does that mean that the borrower is in the clear?

  • THE ANSWER IS A DEFINITE NO!!!! 
  • This is the reason
  • When borrowers provide two months actual bank statements, there will be a column itemizing YTD (year to date) overdrafts and overdraft fees
  • If there is a number there, it will trigger a red flag and loan application will most likely be denied
  • So, if the borrower had any overdrafts in the past 12 months, providing bank statements to the underwriter is out of the question
  • This is a don’t ask don’t tell case scenario

Lenders will not ask borrowers whether they had a bank overdraft in the last 12 months on the mortgage application.

Bank Statements In The Mortgage Process: Printouts Versus Statements 

If borrowers provide lenders two month’s work of bank statement printouts and not actual bank statements, there is no overdraft or YTD overdraft section on most bank statement printouts:

  • Bank statement printouts are allowed in lieu of bank statements
  • Borrowers need to go to their bank and see a teller
  • Ask them to get you 60 days of bank statement printouts
  • Borrowers need to get the printouts dated, signed, and stamped by the teller
  • As long as there are no overdraft fees or overdrafts on bank printouts, which most do not have, borrowers will be safe during the mortgage approval process

I strongly recommend that all consumers get overdraft protection on all of the bank accounts.

Qualifying For Mortgage With Lender With No Overlays

Qualifying For Mortgage With Lender With No Overlays

Borrowers who need to qualify for a home loan with a national direct lender with no overlays can contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com.

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