Checking, savings, and investment accounts are a vital part of your mortgage approval.
Your mortgage lender will review bank statements to ensure you have enough money to close the loan. But a dollar amount isn’t all they look for.
Here are items that can cause mortgage delays or even put your approval at risk.
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1. Large Unverified Deposits
Lenders do not investigate all large deposits. Regular pay from your employer, IRS tax return deposits, or child support payments probably won’t need further documentation. But certain other large deposits will.
For conventional loans, you need to prove the source of deposits exceeding 50% of the monthly qualification income. For example, if you and your spouse make $8,000 per month before taxes, a deposit of $3,000 would not need to be sourced, but a $4,500 deposit would.
Rules for FHA, VA, and USDA loans may be different, so check with your lender.
If a deposit can’t be sourced, the lender may reduce your qualified assets by the deposit amount. Remaining funds must cover your down payment and closing costs.
2. Less Than 60 Days of History
Most types of mortgages require 60 days of history. Usually, your last two bank statements will suffice. But if your bank issues statements monthly, you may have only 58 days’ history around February, for instance. In this case, submit the last three months of bank statements.
3. Outdated Bank Statements
Fannie Mae requires that bank statements are no more than 45 days old at the time of application. In addition, you will need new statements if they expire during the mortgage process. Supply the most recent statements available.
4. NSF Charges
One or two non-sufficient funds (NSF) charges in the past few months won’t derail your mortgage approval. But regular, ongoing NSFs could cause the underwriter to doubt your ability to keep up with mortgage payments.
Any NSF may require a letter of explanation, especially for borrowers with low credit or other weak aspects of their file.
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5. Missing Pages
A mortgage underwriter’s pet peeve is missing bank statement pages. Some banks always include a blank page at the end. The underwriter needs this to make sure you’re not hiding anything.
Look at the bottom of your statement. If it says, for example, “page 1 of 10,” include all 10, even if some are blank.
6. Incomplete Bank History Printouts
Bank account history printouts are convenient but usually lack important information like your name, address, and account numbers. The lender needs the actual statement. Usually, banks offer official PDFs downloadable from your online account.
7. Unknown Addresses
You are required to state your current address on your mortgage application. The lender will verify that the address on your bank statements matches.
An unknown address on your bank statements will require an explanation, as this could be an indication of mortgage fraud.
8. Unknown Account Owners
You are allowed to be a joint account holder with someone who is not on the loan. However, the lender may require an explanation if you are a co-owner of an account with an unknown and unrelated individual.
Some borrowers add themselves to a relative’s bank statements because they don’t have enough in their own account. This is typically unnecessary, since you are allowed to cover your entire down payment and closing cost requirement with gift funds in most cases.
9. Unexplained Payments To Individuals and Companies
Payments or regular withdrawals that don’t match up to any debt on the credit report may indicate you have undisclosed debt. The underwriter must add all debt payments to your debt-to-income. Expect to explain regular withdrawals that appear to be payments. Some examples are child support, alimony, or payment for a loan from an individual.
10. Insufficient Funds to Close the Mortgage
You must have enough in your accounts to close the mortgage, including down payment, closing costs, and in some cases, reserve funds.
If your asset requirement is $12,000, but you can only verify $11,500, the lender will not issue final documents or allow the loan to close.
11. High Balances Not Proportional to Salary
An unexplained large balance in a checking, savings, or investment account will be questioned if it seems unrealistic for your salary.
For example, someone making $5,000 per month is unlikely to have $250,000 in a checking account.
The lender will question such large balances even if there are no large deposits within the last two months. Such a balance could indicate an undisclosed loan, illegal activity, or mortgage fraud.
Don’t Hide Questionable Items on Your Bank Statements
If you have unexplained items on your bank statements, don’t try to hide them from your lender.
Be upfront about the issues and get guidance on how to explain and document them appropriately. With a little planning, imperfect bank statements won’t derail your mortgage goals.
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About The Author:
Tim Lucas spent 11 years in the mortgage industry and now leverages that real-world knowledge to give consumers reliable, actionable advice. Tim has been featured in national publications such as Time, U.S. News, MSN, The Mortgage Reports, and more.
