When applying for a home loan, mortgage lenders take careful time to review your finances before approving your loan. This is to make sure you have enough money for a down payment and that you’re able to make your monthly payments. Part of how they do this reviewing your statements. Here are the items mortgage lenders review on your bank statements.
The Items Mortgage Lenders Review on Bank Statements
One of the biggest items mortgage lenders review on bank statements is overdraft fees. Lenders typically request your last two bank statements when they evaluate your finances. Having a long list of overdraft fees indicates to your lender that you may not be the best at managing your finances and adding a mortgage to your list of payments isn’t a good option for you. Go into your bank statements before sending them to the lender and see if there are any error overdraft charges. Banks will often remove the charge if it was a mistake.
Sure you may have thousands of dollars in your savings now, but is that due to large monetary gifts? If this is the case, your lender may be wondering how long your funds can support paying a mortgage. Additionally, this could be a sign of illegal or unacceptable deposits. Unless you can provide a letter of explanation for your large deposit, it’s likely that your lender will disregard those funds when assessing your overall remaining dollars.
Random large payments
One of the best ways to ensure that your bank statements won’t raise any red flags is to have a consistent track record of payments. For example, if your car payment and your student loans are set to autopay to a bank every month, your lender won’t see this as a red flag. However, if you have large sums being paid to individuals (rather than a bank) lenders could see this as a non-disclosed credit account. This would be like if your parents paid for your car and you are paying monthly to them. Paying under the table like this can cause concern for your lender.
At the end of the day, before you provide any piece of documentation to your lender, make sure to review it first. If there are errors, take the time to fix them. It’s better that you fix them than having to send to your lender and having to wait much longer. This could delay the closing of your loan. Additionally, if you know you have a line item in your bank statement that may raise a question from your lender, pro-actively create a letter of explanation so the process can keep moving forward and you can close on time.
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