Getting a mortgage can be a long, daunting process. You’ll need to navigate a bunch of different steps and attend to several unfamiliar details. One of the most crucial steps you’ll need to take is to submit bank statements for your mortgage application.
As tedious as it is to track these down, bank statements provide an important window into your financial situation and help lenders determine whether or not they should approve you for a home loan.
Why lenders need bank statements to approve your mortgage
The law requires that lenders make a good-faith attempt to determine whether or not borrowers are capable of making their mortgage payments. Bank statements offer insight into your financial situation that helps lenders make that determination.
For example, your deposits help the lender verify your income and its source, and your savings tell the lender if you’ve got sufficient funds to cover a major repair or weather a financial emergency.
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What do mortgage lenders look for on bank statements?
Lenders want to see “seasoned and sourced” funds in your accounts — that is, money from identifiable sources that has been in your account long enough to convince the lender the assets are your own. They want to ensure the funds are not undisclosed gifts meant to pad your accounts.
Here’s a breakdown of what lenders will look for on your personal bank statements:
- Cash reserves: Come closing day, you’ll have to pay the balance of your down payment plus closing costs. Lenders look at your bank accounts to ensure you have enough money to pay these costs. Closing costs typically amount to 2% to 5% of the purchase price, so you’ll need to make sure you have enough cash on hand to cover them.
- Regular deposits: Lenders look at your deposits to make sure they have a clear source, such as payroll, and that they’re consistent with the monthly income disclosed on your application.
- Reasonable withdrawals: Withdrawals give lenders a snapshot of how you spend your money. Yours should be consistent with regular household expenses and payments toward the debt you disclosed on your application.
What mortgage lenders don’t want to see on your bank statements
Indications that you’re struggling financially can raise serious red flags when you’re applying for a mortgage. Here are some things the lender doesn’t want to see:
- Overdrafts: Overdrawing your account suggests you’re living above your means or are having trouble making ends meet. Either issue might cause your lender to question whether you can afford a mortgage.
- Large deposits: Large deposits that aren’t from payroll or another disclosed source can signal that you’ve received gift funds or borrowed money to inflate your balances. Your loan might allow you to use gift funds for your down payment, but those gifts, in addition to all your debt, must be disclosed in a letter of explanation.
- Unexplained withdrawals: Your lender might suspect that large or unusual withdrawals might be serving as payments on a loan from a family member or friend. If you have such a loan and haven’t disclosed it, your lender could decline your application.
Tip: If you have a unique financial situation and you don’t believe it will be understood by a lender’s automated underwriting system, you can request manual underwriting.
This will ensure your mortgage approval process goes through a human being rather than a computer, and it could improve your chances of getting the loan.
How to find your bank statements
Finding and gathering your bank statements for your mortgage application can take some time, especially if you have more than one account. But it’s not difficult to do.
1. Log into your bank account
Log into your account using your username and password, and then navigate to your account page.
2. Enroll in paperless statements
If you’re currently receiving paper statements in the mail, you might need to enroll in paperless statements to get access to your statements online.
3. Navigate to your online statements
Follow the menus on your account page. There should be a section clearly labeled “Statements” or something similar.
4. Open the statements you want to download or print
Select the statements you need from the list of available statements, and then download the PDFs to your computer or print them directly from the bank website.
Repeat this process for each account that you need statements from.
Frequently asked questions
Here are the answers to a few commonly asked questions regarding bank statements for mortgages.
Are bank statements required for a mortgage?
Generally, yes. You’ll almost certainly be required to submit bank statements to be considered for a mortgage loan — at least one to two months’ worth.
Also See: Your Mortgage Pre-Approval Checklist: Every Document You’ll Need
Can you request a bank statement early?
Because you can print your statements yourself, you don’t need to request one in advance. Follow the instructions from your mortgage representative — or, if you’re applying online without assistance, the application — for the number of statements you need.
If, for example, you need 60 days’ worth, the lender will expect the most recent 60 days’ worth.
How many months of bank statements do you need for a mortgage?
Mortgage lenders generally want to see 60 days’ worth of statements for Fannie Mae-owned loans or government-backed loans (such as USDA, VA, and FHA loans).
For Freddie Mac-owned loans, 30 days’ worth of statements might suffice.
What is a Verification of Deposit (VOD) and do I need one?
A verification of deposit is a document from your bank that verifies the deposits listed on your loan application. It shows the lender that the cash is yours and that you can access it to fund your down payment and closing costs, or that you have enough to draw from in the event of a financial setback.
You do need verification, but your bank statements might be enough to satisfy your lender. If not, the lender can send your bank a Request for Verification of Deposit form, in which case your bank will supply the lender with the information it needs.
Keep Reading: Mortgage Qualifications: How to Qualify for a Mortgage
