When applying for a mortgage loan, most lenders will ask you to supply at least one or two months of bank statements to get a better picture of your financial stability and responsibility. If you are applying for a bank statement loan, you could be asked for about one to two years’ worth of bank statements.
What Bank Statements do Lenders Want to See?
In the most traditional of home loans, a lender with ask for the most recent two months of bank statements to accompany the mortgage application, you could be asked for more in the underwriting process, depending upon the loan. You will need to provide recent statement applications for any account in which you plan to use to help qualify for the loan.
Lenders use bank statements to help verify an accurate cash flow to be able to pay the loan back. They look at cash flow as well as for any unusual activity. They also want to ensure you have not taken on any new and recent large debts.
What are some items that a lender will not want to see on a bank statement when you are applying for a home loan?
Before handing over bank statements to a lender for application approval you might want to look them over as if you were looking at them from an underwriter’s point of view.
This will help you to see any red flags that might cause a hiccup in your mortgage application process. Mortgage underwriters are given the task to look for any possible concern in every detail. Here are some things to look for as you are going over your bank statement that could turn up as a red flag to a mortgage underwriter.
Checks with insufficient funds
The words nonsufficient funds are a large red flag to an underwriter. If your checking account has even just one overdraft or there are several this could be concerning. The mortgage rule making agency Freddie Mac tells lenders that additional scrutiny will be required should a lender find any evidence of payments being made with insufficient funds from the account. In the event that you are applying for an FHA loan, lenders are required to manually re-approve borrowers that have any nonsufficient fund markers in their account, even if a borrower has already been approved in a computerized system.
Unaccounted for deposits
Very large bank deposits that seem to have no explanation or details behind them could indicate that funds for any part of the purchase of the home or coming from an unlawful or an unacceptable source. For example, this can communicate to a lender that the borrower could be taking a cash advance from a credit card, and this does not show up on a credit report. Or it could mean that a borrower has received what is considered an illegal gift to help purchase their home with.
Any large deposits will be asked for further clarification and for proof of where they came from to ensure that money is being lent within the rules and laws, and that the lender did everything to their ability to make sure that it has been done that way.
A reoccurring payment with no explanation
One concerning aspect for an underwriter is finding a monthly payment that does not correspond to any credit account that has been disclosed on your application. Most often a credit report will show credit cards, auto loans, student loans, and other debt accounts, but not every creditor that you owe money to and report to the major credit bureaus. This is not uncommon for borrowers who may have a private, personal, or business loan from an individual or investor instead of a bank, as these will not show up on a credit report. If you are making a monthly automatic payment on this type of a loan and it is not on a credit report, it is likely to stick out to an underwriter and cause them to ask some questions for clarification.
For more information on your mortgage options in Mission Viejo and surrounding areas please contact me any time, including bank statement mortgages and jumbo or super jumbo loans, please contact me anytime.
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