How Underwriters Analyze Bank Statements Of Borrowers

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How Underwriters Analyze Bank Statements Of Borrowers

This BLOG On How Underwriters Analyze Bank Statements Of Borrowers Was Written By Dale Elenteny of Gustan Cho Associates And UPDATED And PUBLISHED On October 1st, 2019

How Underwriters Analyze Bank Statements
Gustan Cho Associates
 

Borrowers applying for a mortgage loan application, one of the most important things an underwriter will require is 60 days of bank statements.

  • Two months of bank statements are required
  • Mortgage Underwriter will closely analyze borrowers bank statements
  • The underwriter will look for regular deposits, irregular deposits, large deposits, and overdrafts
  • Many folks have multiple bank statements
  • Just because having multiple bank statements, borrowers do not have to provide all of the bank statements
  • When an underwriter request 60 days of bank statements, they are not requesting all of the bank accounts
  • The only bank statement or bank statements needed is the bank statement or bank statements that have the sourced down payment and/or closing costs

In this article, we will cover and discuss how underwriters analyze bank statements.

Multiple Bank Statements

For example, if $3,500 for the down payment is required and the borrower has three bank accounts as follows:

    • $2,000 in bank account A
    • $1,500 in bank account B
    • $300.00 in bank account C
  • The borrower needs to provide bank accounts A and bank accounts B and not submit bank account C
  • If a borrower has 12 bank accounts and with money in all of the bank accounts, they can just provide one bank account with sufficient funds that are needed for the down payment and closing costs
  • If borrowers provide all of the bank accounts, all bank account statements that are provided to the underwriter will be scrutinized and analyzed

How Underwriters Analyze Bank Statements On Regular Deposits

How Underwriters Analyze Bank Statements On Regular Deposits

One of the things that a mortgage loan underwriter will analyze is regular deposits.

  • For example, with regular payroll check automated deposited electronically to a bank account every other week, that will be looked at as normal and no further explanation is necessary
  • The mortgage underwriter will look at the electronic deposit and notice being payroll check being electronically deposited by employer’s payroll service and that is okay
  • If there are other regular deposits on a regular basis to the bank account, whether it is electronically or a physical deposit, the underwriter will ask and question what the source of the deposit is

Borrowers with part-time jobs that are being cashed by the employer and depositing that cash, that cash deposit cannot be used.

How Underwriters Analyze Bank Statements With Cash Deposits

How Underwriters Analyze Bank Statements With Cash Deposits

Cash in the mortgage world cannot be used as sourced funds:

  • However, borrowers with regular deposits from a regular part-time job and can provide the copy of a check and deposit slip, that regular deposit can be used to sourced funds
  • Even though borrowers have regular deposits to the bank account, the deposits need to be sourced

Another example is when getting regular child support payments or alimony payments being deposited regularly to the bank account the underwriter will require to provide documentation of the deposit transactions and the terms.

How Underwriters Analyze Bank Statements With Irregular Deposits

How Underwriters Analyze Bank Statements With Irregular Deposits

Irregular deposits are when there could be trouble.

  • Irregular deposits are allowed
  • Any irregular deposit over $200 will be questioned
  • Proof of source will be required in order for the underwriter to count it as part of 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 assets
  • It’s okay to make irregular deposits that have not been sourced but cannot use it as part of the funds available to use towards a 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
  • Mortgage lender only requires 60 days of bank statements

Sourcing Irregular And Large Deposits In Bank Statements

Sourcing Irregular And Large Deposits In Bank Statements

Irregular deposits and large deposits in bank statement can be used as long as it can be sourced.

  • For example, a large $10,000 deposit in the past sixty days where the large deposit was from the sale of a second home, that $10,000 deposit can be used as long as borrower can provide the copy of the HUD settlement statement from the sale of second home as well as the deposit slip and/or wire confirmation going to bank account

Funds from large ticket items such as a car, motorcycle, RV, a boat can be used if the borrower can provide a copy of the bill of sale, copy of the check, and the deposit slip.

How Underwriters Analyze Bank Statements And Withdrawals

How Underwriters Analyze Bank Statements And Withdrawals

Mortgage lenders do not care about withdrawals from 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 positive assets and cash to close
  • Automatic monthly withdrawals can be used to prove rental verification and other monthly payments that an underwriter may request that the applicant is paying his or her bills on time
  • Canceled checks and/or bank statements are required by lenders to verify that the earnest money check has cleared.

Mortgage Guidelines On Gift Funds 

what are Mortgage Guidelines On Gift Funds

Gift funds are allowed to be used for the 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
  • Also the gift letter has the verbiage that 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 In Bank Statements Can Be Deal Breaker

Overdrafts In Bank Statements Can Be Deal Breaker

Overdrafts can be a deal breaker for any mortgage loan applicant.

  • 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 underwriter
  • Borrowers with multiple bank accounts and have some bank accounts with overdrafts, do not submit the bank statements with overdrafts

There are solutions to solve the bank statement overdraft problem.

Solution To Bank Statements With Overdrafts And How Underwriters Analyze Bank Statements

How Solution To Bank Statements With Overdrafts And How Underwriters Analyze Bank Statements

Mortgage lenders require borrowers to only provide 60 days of bank statements.

  • What if borrowers did not have any overdrafts in the past 60 days in bank statements but had overdrafts prior to the 60 days? 
  • Borrowers provide actual bank statements for the past 60 days
  • If there are no overdrafts it is fine
  • But if they had overdrafts prior to the 60 days, there is a column in bank statements that lists year-to-date overdraft fees (YTD Fees)
  • This will alert the underwriter that they had bank overdrafts in the past 12 months
  • If this is the case, borrowers should not submit actual bank statements
  • What they need to do is go to 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 bank statements can be used in lieu of actual original bank statements
  • Borrowers with bank overdrafts in the past 12 months, go to bank and get 60 days of bank printouts and get those printouts signed, dated, and stamped by the bank teller

Borrowers with recent overdrafts and do not have any other bank accounts without overdrafts, then the only solution is waiting sixty days and let the overdrafts season for 60 days.

Qualifying For Mortgage With Lender With No Lender Overlays

How Qualifying For Mortgage With Lender With No Lender Overlays

Borrowers who need to qualify for mortgage with a direct lender with no mortgage overlays can contact us at Gustan Cho Associates Mortgage Group 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. The Gustan Cho Team at Loan Cabin Inc. has zero overlays on FHA Loans, VA Mortgages, USDA Home Loans, and Conventional Loans.

This BLOG On How Underwriters Analyze Bank Statements is a rewrite and update from an earlier blog post and has been updated by Gustan Cho Associates Mortgage Group.

Related> Why do mortgage underwriters look at bank statements?

Related> Funds in bank statements

Related> Overdrafts in bank statements

Related> Bank statements in mortgage approval process

Related> Why are bank overdrafts scrutinized by mortgage underwriters?

2 Comments
  1. ann womack says

    Our FHA loan is headed to processing. We sold our home in November and those proceeds were wired to our main checking account. I then transferred the money to another one of our checking accounts. I submitted two of those bank statements because that is where the money is deposited for our down payment. Now they are asking for two months of bank statements from our main checking account. The issue is between January and June of 2018 we had 24 overdrafts no NSFs. We had a death in the family ended up having to pay for the funeral, getting custody of my wife’s niece and several other issues that caused us to use our finances. Is there anyway to get around giving them the bank statements from our main account because Bank of America list on their bank statements how many overdrafts you have?

    1. Gustan Cho, NMLS 873293 says

      We handle borrowers with overdrafts all the time. It depends on the lender on how strict they are with bank overdrafts. Please call or text me on my cell at 262-716-8151 or email me at gcho@loancabin.com. We are licensed in the state of Georgia and have loan officers in Georgia. Looking forward to working with you and your family.

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