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Why Lenders Need Bank Statements For A Mortgage

Joel Reese

3 - Minute Read

UPDATED: Jan 26, 2023

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When you start your home buying journey, lenders will want to see a lot of financial material, including a credit report, retirement account statements and bank statements, as they provide actual hard data and insight into the ways you manage your finances. We’ll talk through the purpose of bank statements when getting a mortgage.

Why Do Lenders Need Bank Statements to Approve a Mortgage?

When you begin the mortgage process, underwriters want to be sure you have the funds to cover the substantial costs that come with taking on a mortgage. Bank statements prove that you have money for a down payment, provide insight into your spending patterns and demonstrate that your income matches your claims.

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How Far Back Do Mortgage Lenders Look at Bank Statements?

Lenders typically look for 2 months of bank statements from potential borrowers, which provides enough data to assess your income consistency, spending habits, account balances and other crucial financial information. It’s possible the lender may ask to see more bank statements for additional insights in process, too.

What Do Lenders Look For In Bank Statements?

Bank statements offer demonstrable proof of how you spend your money ‑— and where you get it. They also prove your ability to live within your means and maintain a reasonable degree of financial stability.

Lenders Like To See …

Why?

Verification of monthly income

Having a stable monthly income indicates that you have steady wages and can likely pay your mortgage.

Recurring monthly payments

Making recurring monthly payments for other obligations proves you are financially responsible and likely pay your bills on time.

History of expenses

Showing you have a history of expenses illustrates that you have the discipline to responsibly manage your finances, make purchases and still have enough money left to afford a mortgage payment.

Cash reserves

A decent reserve of cash means you likely have enough of a cushion to be able to withstand a sudden financial challenge, like losing a job.

Regular pattern of withdrawals

Displaying a regular pattern of withdrawals from your accounts indicates that you likely have a steady source of income that can support your day-to-day living.

Account stability

Demonstrating account stability is critical because it shows you can reliably maintain your finances over an extended period of time.

 
 
 
 
 
 
 
 

What Do Lenders Not Like To See On Bank Statements?

Bank statements can also show financial risks that would make lenders wary about extending you a loan.

Lenders Don’t Like to See …

Why?

Bounced checks or overdrafts

Bouncing checks or experiencing overdrafts can affect your credit score and indicates that you may struggle with financial responsibility, making you a risky bet for a loan.

Gifted funds

Showing gifted funds as a notable percentage of your income could indicate that you can’t to provide funds for yourself.

Large withdrawals

Having a history of large withdrawals could indicate that you have poor money management skills, which raises a red flag for lenders.

New credit accounts

Opening new credit accounts when you are in the mortgage process could indicate you are overstretching yourself financially or relying too heavily on debt to make ends meet.

Funds from undocumented sources

Using funds from undocumented sources can raise suspicions about the legitimacy of this income, as lenders typically need to ensure funds are from verifiable sources.

Any evidence of fraud

Having evidence of fraud in your history could indicate that you are a risky bet for lenders, which would make the unlikely to provide you with a loan.

 
 
 
 
 
 
 
 

Frequently Asked Questions

Several questions often arise in the discussion of bank statements and their role in obtaining a mortgage. They include:

What are sourced and seasoned funds?

During the mortgage process, you’ll likely see the terms “sourced funds” and “seasoned funds.” These are both important classifications for lenders — the former refers to the origin of the money in your account, while the latter indicates that the money has been in your account for up to 90 days before you applied for a mortgage.

Can a bank VOD help solve statement issues?

Questions and discrepancies can arise when you are going through the mortgage process, but a bank's verification of deposit (VOD) can help resolve some of these problems by showing the source of funds that appear in your bank statements. A VOD essentially provides proof that your money came from a legitimate source.

How do I get bank statements?

You can typically obtain your bank statement directly from your bank or credit union by accessing your account online and downloading your statement there. Or, if you prefer that in-person touch, you can visit a branch location and request printed copies of your bank statements.

The Bottom Line: Bank Statements Are Needed for a Mortgage

In short, bank statements are a critical part of the mortgage review process. They provide lenders with insight into your level of financial responsibility, your ability to manage your money and — perhaps most importantly — how much money you can put toward your mortgage. To get started building your savings for a house, download the Rocket Money℠ app today!

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Portrait of Joel Reese.

Joel Reese

Joel is a freelance writer who has written about real estate, higher education, sports, and myriad other subjects. He has been published in The Best American Sports Writing series, Details, Spin, Texas Monthly, Huffington Post, Chicago magazine, and many other outlets. His website, ReeseWrites.net, features several samples of his work.