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What Do Mortgage Underwriters Look In Bank Statements

Gustan Cho Associates
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What Do Mortgage Underwriters Look In Bank Statements

This BLOG On What Do Mortgage Underwriters Look In Bank Statements Was UPDATED On July 1st, 2019

What Do Mortgage Underwriters Look In Bank Statements
GCA

Borrowers applying for a mortgage loan, one of the things lender 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
  • 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 payment
  • For example, if a home buyer needs $5,000 for a down payment and 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 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 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 the 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?

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

Overdrafts 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 underwriter that borrower had a history of overdraft in the past 12 months
  • This can potentially kill loan approval

Solutions Of Overdrafts In Past 12 Months

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.

Qualifying For Mortgage With Lender With No Overlays

Qualifying For Mortgage With Lender With No Overlays

Borrowers with less than perfect credit needing to qualify for a mortgage with a direct lender with no lender overlays can contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. The Gustan Cho Team at Loan Cabin Inc. is a direct lender 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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