When applying for a mortgage, you will be required to provide a range of financial documents to the lender. One of these documents will be your bank statement. The lender will review your bank statement to assess your financial situation. In this article, we will discuss what mortgage lenders look for when reviewing bank statements.
1. Your Monthly Income
The first thing that mortgage lenders review on bank statements is your monthly income. They will look at your deposits to determine your monthly income. This is important because it helps the lender determine how much you can afford to borrow. If your income is not enough to cover your mortgage payments, the lender may deny your application.
2. Your Monthly Expenses
The lender will also review your bank statement to determine your monthly expenses. This includes your rent/mortgage payments, car payments, credit card payments, and other monthly bills. If your monthly expenses are high, the lender may view you as a higher risk borrower, which could impact your chances of getting approved for a mortgage.
3. Your Savings
An important thing that mortgage lenders review on bank statements is your savings. The lender will look at your account balance to determine how much money you have saved. This is important because it helps the lender determine if you have enough money to cover your down payment and closing costs. If you don’t have enough savings, the lender may require you to get a cosigner or deny your application altogether.
4. Large Deposits
When reviewing your bank statement, the lender will look for any large deposits. Large deposits can indicate that you have received a gift or a loan from someone else. The lender will want to know the source of the deposit and may require you to provide additional documentation to verify the source.
5. Overdraft Fees
Mortgage lenders also review your bank statement to see if you have incurred any overdraft fees. This can indicate that you are not managing your finances well. Overdraft fees can also impact your credit score, which can affect your chances of getting approved for a mortgage.
6. NSF Fees
NSF (Non-Sufficient Funds) fees can also impact your chances of getting approved for a mortgage. These fees are charged when you don’t have enough money in your account to cover a payment. If you have a history of NSF fees, the lender may view you as a higher risk borrower.
7. Multiple Accounts
If you have multiple bank accounts, the lender will review all of them. They will want to see how much money you have in each account and if there are any discrepancies between the accounts. If you have a lot of accounts, the lender may require you to consolidate them.
8. Large Withdrawals
The lender will also review your bank statement for any large withdrawals. Large withdrawals can indicate that you are transferring money to someone else or that you are using the money for something other than your mortgage payments. The lender will want to know the reason for the withdrawal and may require additional documentation to verify the reason.
9. Cash Deposits
If you make a lot of cash deposits, the lender will want to know the source of the cash. Cash deposits are more difficult to verify than other types of deposits, so the lender may require additional documentation to verify the source.
10. Payroll Deposits
The lender will also review your bank statement for any payroll deposits. This can help the lender verify your income and employment. If you are self-employed, the lender may require additional documentation to verify your income.
11. Checks Deposited
The lender will review your bank statement for any checks that you have deposited. They will want to verify the source of the checks and may require additional documentation to verify the source.
12. Loan Payments
The lender will also review your bank statement for any loan payments that you are making. This includes car loans, student loans, and other types of loans. The lender will want to see how much you are paying each month and if you are making your payments on time.
13. Credit Card Payments
If you have credit card debt, the lender will want to see how much you are paying each month. They will also want to see if you are making your payments on time. If you have a lot of credit card debt, the lender may view you as a higher risk borrower.
14. Investment Accounts
If you have investment accounts, the lender will review them to see how much money you have invested. They will also want to see how much money you are earning from your investments. This can help the lender determine your overall financial situation.
15. Retirement Accounts
The lender will also review your retirement accounts to see how much money you have saved. This can help the lender determine if you have enough money to cover your down payment and closing costs. If you don’t have enough savings, the lender may require you to get a cosigner or deny your application altogether.
16. Child Support Payments
If you are paying child support, the lender will want to see how much you are paying each month. They will also want to see if you are making your payments on time. If you are not making your payments on time, the lender may view you as a higher risk borrower.
17. Alimony Payments
The lender will also review your bank statement for any alimony payments that you are making. They will want to see how much you are paying each month and if you are making your payments on time.
18. Other Income Sources
If you have other sources of income, such as rental income or investment income, the lender will want to see how much money you are earning. This can help the lender determine your overall financial situation.
19. Your Employment History
The lender will review your bank statement to determine your employment history. They will want to see how long you have been employed and if you have a history of steady employment. This can help the lender determine if you are a stable borrower.
20. Your Credit Score
Your credit score is an important factor that mortgage lenders consider when reviewing your bank statement. They will want to see if you have a good credit score and if you have a history of making your payments on time. If your credit score is low, the lender may view you as a higher risk borrower.
21. Your Debt-to-Income Ratio
The lender will also review your bank statement to calculate your debt-to-income ratio. This is the amount of debt you have compared to your monthly income. If your debt-to-income ratio is too high, the lender may view you as a higher risk borrower.
22. Your Payment History
The lender will review your bank statement to see if you have a history of making your payments on time. If you have a history of late payments, the lender may view you as a higher risk borrower.
23. Your Employment Status
The lender will want to know your employment status. If you are self-employed, the lender may require additional documentation to verify your income. If you are unemployed, the lender may view you as a higher risk borrower.
24. Your Residency Status
The lender will want to know your residency status. If you are not a citizen or permanent resident, the lender may require additional documentation to verify your residency status.
25. Your Age
Your age can also impact your chances of getting approved for a mortgage. The lender will want to know how old you are and if you have a history of stable employment.
26. Your Loan-to-Value Ratio
The lender will also calculate your loan-to-value ratio. This is the amount of the loan compared to the value of the property. If your loan-to-value ratio is too high, the lender may view you as a higher risk borrower.
27. Your Down Payment
The lender will want to know how much money you are putting down as a down payment. This can help the lender determine if you have enough money to cover your down payment and closing costs.
28. Your Closing Costs
The lender will also want to know how much money you are paying in closing costs. This can help the lender determine if you have enough money to cover your closing costs.
29. Your Loan Type
The type of loan you are applying for can also impact what the lender reviews on your bank statement. For example, if you are applying for an FHA loan, the lender may require additional documentation to verify your income and employment history.
30. Conclusion
When applying for a mortgage, the lender will review your bank statement to assess your financial situation. They will look at your monthly income, monthly expenses, savings, large deposits, overdraft fees, NSF fees, multiple accounts, large withdrawals, cash deposits, payroll deposits, checks deposited, loan payments, credit card payments, investment accounts, retirement accounts, child support payments, alimony payments, other income sources, employment history, credit score, debt-to-income ratio, payment history, employment status, residency status, age, loan-to-value ratio, down payment, closing costs, and loan type. By understanding what the lender reviews on bank statements, you can better prepare for the mortgage application process.