When you apply for a mortgage with us, you’ll probably expect us to look at your credit score or ask to see your pay stubs. You might be more surprised when we request your bank statements as well, however.
No, this isn’t us being difficult. Industry standards and mortgage banking regulations require lenders to confirm the presence and source of your down payment and closing cost funds and to ensure you can afford your monthly mortgage payments. Reviewing your bank statements (typically the last two months’ worth) is one way we fulfil this requirement.
By knowing what to expect from this step, you can make the mortgage process smoother and increase your chances for a loan approval. Before you apply for your mortgage, try to ensure your bank statements stay free of these red flags.
A recent history of overdraft charges or insufficient funds is a worrying sign for lenders. To prove that you’re a good borrower, do what you can to keep your accounts out of the red.
Making a large deposit into your bank account before buying a home may seem like a natural step, but it can raise red flags. Funds from certain sources are unacceptable or illegal to use for mortgage payments, so you’ll need to provide an acceptable explanation for large non-payroll deposits. Without the right “paper trail” for your deposits, those funds may not be considered when qualifying you for your loan.
Signs of non-disclosed credit
Just as unexplained deposits can hinder your loan qualifications, so can unexplained payments. For example, if you have recurring payments to a family member for money you owe them, lenders could count that against your qualifications.
It’s best to start preparing your bank accounts to meet these criteria several months before you apply for a mortgage. This helps ensure you can start shopping for a home when you want and that your loan will be ready when you need it. Make sure to maintain good financial practices throughout the entire mortgage process.