Lenders need to validate your credit history, income and how much funds you have available to close on a purchase transaction. After you submit a loan application, the lender will also pull a credit report and obtain a credit score to validate a responsible credit history. Your pay check stubs and W2 forms will show how much money you make and if you’re self-employed your federal income tax returns will be reviewed. And to make sure you have ample cash in the bank for a down payment and closing costs, you’ll need to provide copies of your most recent bank statements. Sometimes however, those bank statements contain information that you might have to answer to. What could that be?
Let’s say you get paid on the 1st and 15th each and every month and you direct deposit into your checking account $3,238 each and every time. Lenders will use this information to verify with these bank statements you are employed and these deposits match up with your monthly pay. Problems can occur however when there are deposits that don’t appear to come from your employer in different amounts in random days.
For example, in addition to your regular pay, a deposit in the amount of $1,700 shows up on the 19th. The lender doesn’t know where these funds came from. Is this a gift from someone? Did you borrow money and are expected to pay it back? Do you have a side business the lender doesn’t know about? These are all legitimate reasons why your bank statements can put the brakes on a loan approval until the lender feels comfortable with your answers. Most often it’s a simple, written explanation where the funds came from. If the funds can’t be verified, they won’t be counted as having enough funds to close on the transaction.
All pages of your statements must be provided as well, even if a page is blank. Without the missing page, the lender doesn’t know what’s on it. If there are others named on the bank statements that will not be on the mortgage with you, the lender will need to determine how much of the funds belong to you and how much from the other person. In addition, your name, address and bank account numbers will also need to appear on these pages.