Mortgage lenders are the key to whether you receive loan approval or rejection. They can examine your finances to make sure that you have the money for a down payment; they can also figure out if you will be able to make your regular monthly payments. Your bank statements play a role in this process. Below are the top three warning signs that mortgage lenders look out for when they review your statements.
Mortgage Lenders and Overdraft Charges
Typically, lenders will examine your last two months of bank statements when they evaluate your finances. Many overdraft charges are a big red flag to lenders; they indicate that you might not be a good borrower. Regardless of any explanations that you might provide, insufficient funds and overdraft charges demonstrate that you might not be great at managing your finances.
When lenders look at your bank statements, any large lump sum of money or irregular deposits can raise eyebrows. These types of deposits can appear to be suspicious; they might even look like they come from an unacceptable or illegal source. Lenders will typically disregard those funds and use the remaining balance to determine your eligibility; they will do this unless you provide a reasonable and acceptable explanation for those deposits.
Banking with the Family
Having consistent and trackable payments is helpful for lenders, but it works the opposite way for payments that go to an individual rather than to a bank. Lenders can potentially classify those payments as part of an undisclosed credit account. For example, this might include a loan from your parents for a car, rather a loan from a bank.
Organizing your bank activity and your statements before the loan application process will give you the best shot at getting mortgage approval. Lenders prefer not to see recent deposits. That is because any large deposits that you make right before you submit a mortgage application might insinuate to lenders that the money you claim to own is not actually yours; at best, this money is not a seasoned asset. Thus, be extra careful with your transactions for three to six months prior to a mortgage loan application.