Bank Statement

Bank statements will be thoroughly scrutinized during the mortgage approval process.  Mortgage lenders want two months worth of bank statements and 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.  If you have multiple bank accounts and are transferring funds from one account to another, all bank statements need to be used.  Mortgage lenders also want to see down payment funds seasoned in the mortgage loan borrower’s bank account.

Irregular And Large Deposits

If you have irregular deposit or large deposits showing in your bank statement, it needs to be sourced.  The mortgage loan underwriter will want proof where the irregular or large deposit came from and 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, the mortgage loan borrower needs to provide the bill sale, copy of check, and copy of deposit slip plus a letter of explanation.  If you get a gift to use towards the down payment, you need to provide a gift letter from the donor stating that the gift is only a gift and that it does not need to be paid back as well as funds transferring from the donor’s account into your account along with a 30 day bank statement from the donor showing that the funds have been seasoned.  Remember that mortgage lenders only require to see 60 days worth of bank statements.

Funds That Cannot Be Sourced

There are mortgage loan borrowers who have mattress money ( cash in hand ) that they would like to use towards their down payment on their home purchase.  Undocumented cash is nonexistent in the mortgage business and cannot be used for mortgage qualification.  If you have a substantial amount of cash and cannot source the cash, there is a solution.  You need to make the cash deposit in your bank account as soon as possible and wait 60 days.  After your cash has been seasoned in your 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 has been given to you and 60 days has 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.  If you had 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 lenders view bank overdrafts as financial irresponsibility and take overdrafts extremely seriously.   Mortgage lenders want to only see 60 days of bank statements right?   So if a person had an overdraft 6 months ago and the mortgage lender only wants to see 2 months bank statements, does that mean that the mortgage loan borrower is in the clear?  THE ANSWER IS A DEFINITE NO!!!!  This is the reason.  When you 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 your loan application will most likely be denied.  So, if you had any overdrafts in the past 12 months, providing bank statements to your mortgage lender is out of the question.  This is a don’t ask don’t tell case scenario.  Mortgage lenders will not ask you whether you had a bank overdraft in the last 12 months on your mortgage application.  If you provide the mortgage lender 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.  You need to go to your bank and see a teller and ask them to get you 60 days of bank statement printouts.  You need to get the printouts dated, signed, and stamped by the teller.  As long as there are no overdraft fees or overdrafts on your printouts, which most do not have, you will be safe and your mortgage approval process.  I strongly recommend that you get overdraft protection on all of your bank accounts.

By Gustan Cho

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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