How Underwriters Analyze Bank Statements Of Borrowers
In this article, we will discuss and cover How Underwriters Analyze Bank Statements for mortgage borrowers. For 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’ funds in a bank. The underwriter will look for regular deposits, irregular deposits, large deposits, and overdrafts. Many folks have multiple bank statements. Just because of 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.
How Mortgage Underwriters Analyze 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
One of the things that a mortgage loan underwriter will analyze is regular deposits. For example, with regular payroll checks 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 the 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
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 a copy of a check and deposit slip, that regular deposit can be used to source 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
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 the 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
Irregular deposits and large deposits in bank statements 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
- This holds true as long as the borrower can provide the copy of the HUD settlement statement from the sale of the second home as well as the deposit slip and/or wire confirmation going to the 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, a copy of the check, and the deposit slip.
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
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 are 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.
Required Paperwork From The Donor of the Gift Funds
The donor needs to provide a 30 days bank statement showing that the gift funds have been seasoned for at least 30 days. The gift funds leaving the donor’s account and being deposited into the recipient’s bank account need 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 a copy of the check and a deposit slip from the recipient.
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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 an 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
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 the bank and get 60 days of bank statement printouts
- On bank statement printouts, there are no year-to-date overdraft fees column
- A printout of bank statements can be used in lieu of actual original bank statements
- Borrowers with bank overdrafts in the past 12 months, go to the 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 to wait sixty days and let the overdrafts season for 60 days.
Qualifying For Mortgage With Lender With No Lender Overlays
Borrowers who need to qualify for a mortgage with a lender licensed in multiple states with no mortgage overlays can contact us at Gustan Cho Associates Mortgage Group at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays. Gustan Cho Associates has zero overlays on FHA, VA, USDA, and Conventional Loans.
What Do Mortgage Underwriters Look In Bank Statements
For borrowers applying for a mortgage loan, one of the things lenders will request is bank statements. What Do Mortgage Underwriters Look In Bank Statements is they require 60 days of bank statements. One of the reasons why mortgage underwriters require bank statements is to see if borrowers have sufficient funds for the down payment and closing costs on a home purchase. Things underwriters will look for are irregular deposits and overdrafts. Any irregular deposits of $200 or higher need to be sourced. By source, borrowers need to provide where the irregular deposit came from.
Cash Deposits Need To Be Sourced
Borrowers can have cash deposits but need to be sourced. However, cash deposits that are not sourced cannot be used. I will not count towards funds that can be used towards closing costs and down payments. For example, if a home buyer needs $5,000 for a down payment and the bank account reflects a balance of $5,000 but that $5,000 was a recent cash deposit, that $5,000 balance cannot be used as verified funds for the down payment. However, if the borrower deposited $5,000 from a sale of a vehicle and can provide a copy of the check as well as a bill of sale and title to the vehicle they have sold, the $5,000 deposit is considered sourced funds. It can be used towards verifying and is considered sourced funds for the down payment. Cash is non-existent in the mortgage business. In order for irregular deposits to be used as sourced funds, borrowers need a paper trail.
Gift Funds Needs To Be Sourced
Gift funds from a relative or family member are allowed for FHA Loans. A home buyer can get 100% gifted funds from a family member and/or relative for both the down payment and closing costs for their home purchase. However, the gift funds need to be sourced. Mortgage Underwriters will require a copy of the canceled check from the donor. The donor needs to provide 30 days of bank statements. Needs to provide how the funds leaving the donor’s bank account and the deposit to the recipient’s bank account in order for the gift funds to be valid. A gift letter needs to be signed and dated by the donor stating that the gift funds are not a loan and solely a gift and there will not be a repayment.
What If I Have Cash That I Want To Use Towards My Down Payment On Home Purchase?
Many folks have cash in a safe deposit box at a bank or cash at home because they do not trust banks. Unfortunately, cash is non-existent in the mortgage business. Cannot be used for the down payment and/or closing costs. Borrowers with cash, often called mattress money, need to deposit the cash in a bank account and let it season for two months. Mortgage lenders will require two months of bank statements. So any cash deposits made prior to the two months will not be questioned. The Lender will not have access to it. Home Buyers planning on buying a home in the near future and have unsourced funds, I recommend that they deposit the funds into the bank account as soon as possible and let it season for two months.
What Do Mortgage Underwriters Look In Bank Statements: Overdrafts In Bank Statements
What Do Mortgage Underwriters Look In Bank Statements are overdrafts. Overdrafts in bank statements will definitely kill mortgage loan approval. One overdraft as little as $5 dollars is frowned upon by mortgage underwriters. They consider those who overdraft their bank accounts as financially irresponsible. Lenders do not want to see any overdrafts in the past 12 months. Underwriters will only require two months of bank statements. However, if providing actual bank statements, there will be a column with year-to-date overdraft fees. This will alert the underwriter that the borrower had a history of overdraft in the past 12 months. This can potentially kill loan approval.
Solutions Of Overdrafts In Past 12 Months
What Do Mortgage Underwriters Look In Bank Statements are overdrafts:
- Borrowers with an overdraft in the past 12 months, do not submit the actual bank statements
- I would go to the bank and get two months of printouts of bank statements
- Underwriters accept bank statement printouts that have been signed, stamped, and dated by the bank teller in lieu of actual bank statements
- With bank statement printouts, the year-to-date overdraft column does not exist
- As long as borrowers do not have any overdrafts in the past 60 days bank statements they will be safe
Overdraft protection is strongly recommended. Unfortunately, most banks will not offer overdraft protection for their depository clients unless they have credit scores higher than 680. Check with the bank and see if you can have overdraft protection.
What Do Mortgage Underwriters Look In Bank Statements: Qualifying For Mortgage With Lender With No Overlays
Borrowers with less than perfect credit needing to qualify for a mortgage with a mortgage company with no lender overlays can contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates is a national mortgage company with no lender overlays on FHA, VA, USDA, and Conventional Loans. We are available 7 days a week, evenings, weekends, and holidays.
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January 7, 2022 - 9 min read