How Do Mortgage Underwriters View Bank Overdrafts

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How Do Mortgage Underwriters View Bank Overdrafts

This BLOG On How Do Mortgage Underwriters View Bank Overdrafts Was UPDATED And PUBLISHED On November 9th, 2019

How Do Mortgage Underwriters View Bank Overdrafts
Gustan Cho Associates

They are several ways on How Do Mortgage Underwriters View Bank Overdrafts.

  • Underwriters want to make sure that verified for closing costs and down payment are there
  • Overdrafts can be deal killers and often shows borrower is irresponsible in managing their bank accounts
  • Underwriters see overdrafts as borrowers having potential issues in the future with the ability to repaying their new home loan

In this article, we will cover and discuss how mortgage underwriters view bank overdrafts during the underwriting process.

Bank Overdrafts Are Not Deal Killers

Gustan Cho Associates will accept bank overdrafts with a good letter of explanation by the borrower. However, many lenders will automatically disqualify borrowers with any overdrafts in the past 12 months:

  • The way How Do Mortgage Underwriters View Bank Overdrafts is that most underwriters will deny a borrower if they have any overdrafts
  • An experienced loan officer will realize on How Do Mortgage Underwriters View Bank Overdrafts and will not submit any bank statements with any bank overdrafts
  • One of the main reasons for mortgage denials is due to bank overdrafts
  • Due to How Do Mortgage Underwriters View Bank Overdrafts, any bank statements with overdrafts should not be submitted to processing
  • Once a mortgage underwriter sees any paperwork submitted by borrowers, it is too late
  • The underwriter cannot unsee it

Documents Required To Process Mortgage Loan

Documents Required To Process Mortgage Loan

There are over a dozen documents that will be required for mortgage borrowers to submit when applying for a residential mortgage loan. One of those items will be 60 days of bank statements.

Other documents required are the following:

  • 2 years tax returns
  • 2 years tax returns
  • Bankruptcy papers if applicable
  • Child support paperwork if applicable
  • Foreclosure papers if applicable
  • Copy of rental agreement/lease
  • Social security award letter if applicable
  • Pension award statement if applicable
  • Verification of employment
  • Other documents which are pretty straight forward and are not scrutinized like bank statements are

Borrowers planning on applying for a mortgage loan in the very near future need to be ready on How Do Mortgage Underwriters View Bank Overdrafts during the mortgage loan underwriting process.

Overdrafts In Bank Statements

Overdrafts In Bank Statements

The majority of mortgage lenders will not want to see any overdrafts from a borrower for at least 12 months preceding the mortgage loan application.

  • Overdrafts in bank statements are viewed extremely negatively by mortgage underwriters
  • Overdrafts can, and most often times are, causes for mortgage loan denials
  • The amount of the overdraft in bank statements does not matter
  • The overdraft in bank statements can be as little as one dollar 
  • Borrowers who have a history of overdrafts need an experienced loan officer who can help on how to structure the bank statements prior to submission
  • There are ways of getting around and solving the overdraft problem

How Do Mortgage Underwriters View Bank Overdrafts And Solving Multiple Overdrafts In Past 12 Months

Solving Multiple Overdrafts In Past 12 Months Issues

Multiple Overdrafts In Past 12 Months

Borrowers with multiple bank overdrafts in bank statements in the past 12 months can talk to their loan originators and go over the situation.

  • On case when borrower comes to me for a mortgage loan and I see multiple overdrafts in bank statements in  the past 12 months, I normally do not turn in the bank statements
  • I suggest borrowers go to their bank and get 60 days of print outs of their bank statements
  • Tell the teller that they are applying for a mortgage and get 50 days of bank printouts and get it signed, dated, and stamped by the bank teller
  • Most lenders want to see 60 days of bank statements
  • Borrowers who do not have overdrafts in the past 60 days but have had overdrafts in the past 12 months the actual bank statements will reflect the year to date overdraft fees
  • Bank printouts do not reflect year-to-date overdraft fees columns

How Do Mortgage Underwriters View Bank Overdrafts Bank Statements Versus Bank Printouts

Bank Statements Versus Bank Printouts

The year to date overdraft fees automatically sets up a red flag to the underwriter:

  • The underwriter will be questioning the year to date overdraft fees which in turn borrowers are required to provide additional bank statements
  • However, if a borrower only provide two months worth of bank statement print outs of bank statements that is signed, dated, and stamped by the bank teller, the year to date overdraft fees are not posted on bank statement printouts
  • This practice is not illegal because whatever the underwriter does not ask for borrowers do not have to provide
  • There is no question on the mortgage application where they ask whether the borrower had a bank overdraft in the past year
  • However, once borrower provide actual bank statements and the underwriter catches the overdraft fees on the bank statements borrower cannot retract the bank statements the underwriter has and turn in bank statement print outs
  • Once the underwriter has seen it, it is too late
  • An experienced mortgage loan officer will catch this during processing before it gets submitted to underwriting

Qualifying For A Mortgage With A Direct Lender With No Overlays

Borrowers who need to qualify for a mortgage with a direct lender with no mortgage lender overlays on government and conventional loans, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. We are available 7 days a week, evenings, weekends, and holidays.

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