Why Do Lenders Request Bank Statements During Mortgage Process
This BLOG On Why Do Lenders Request Bank Statements During Mortgage Process Was UPDATED On December 17th, 2018
Many mortgage loan applicants wonder Why Do Lenders Request Bank Statements.
One of a dozen items required by mortgage lenders prior to starting the mortgage process are 60 days of bank statements.
- Bank statements will be scrutinized for deposits and withdrawals
- The mortgage loan underwriter will be the person going through bank statements
- The underwriter will look for deposits and withdrawals of over $200
- Will need sourcing for unusual deposits and withdrawals.
- Overdrafts will be closely looked at
Overdrafts In Bank Statements
Most lenders do not want to see an overdraft from borrowers for at least 12 months prior to the borrower applying for a mortgage loan.
- Many borrowers ask how will the mortgage lender find out if they only require 60 days of bank statements?
- The answer to that is that Year To Date overdraft charges are posted on every bank statements
- Any overdrafts will stick out like a sore thumb
- Mortgage Loan Applicants with overdrafts in the past stand a chance of getting a mortgage loan denial
- Every lender has their own policies with overdrafts
- Some lenders will accept overdrafts with a good letter of explanation
- Other lenders will disqualify anyone with any overdrafts in bank statements
- Bank Statements with overdrafts should not be submitted to processing/underwriting
- If the lender accepts overdrafts in bank statements, the loan officer can help borrowers with letters of explanations
Why Do Lenders Request Bank Statements: Irregular Deposits
One of the reasons Why Do Lenders Request Bank Statements Deposits is to make sure that the funds needed to close has been properly seasoned. Irregular deposits of more than $200 need to be explained.
- Regular deposits like payroll checks is no problem
- But irregular deposits all require proof and letters of explanation
- The underwriter’s job is to trail the money going in and out of your account
- In the event if you got a gift for the down payment of your home purchase, the mortgage underwriter needs to see the copy of the check, the deposit transaction going into your account and the donor’s bank statement for 30 days prior to the donor giving you the gift
- They want to see the funds coming out of the donor’s account and into your account
Earnest Money Deposit
The underwriter will also want to see the source of the earnest money deposit given to the seller.
- They will want to see the funds seasoned in bank account, leaving the bank account, and clearing the account
Why Do Lenders Request Bank Statements: Closing Out Bank Accounts
Unless borrowers want a major paperwork nightmare, do not close out or open bank accounts during the mortgage application process.
- When a bank account holder closes out an account, the underwriter need to source where the funds from the closed account went
- Will want proof as well as letters of explanation
- Trust me, major mortgage delays happen due to sourcing bank statements and although it may seem to be minor, it turns out to be a major deal and closings WILL get delayed.