February 21st, 2018
If you’re considering buying a home, it’s important to make sure your finances are in proper order before you start looking for a house.
Having your finances in shape, and well-organized is essential. You not only need to provide your taxes, proof of employment and paystubs, but also your bank statements.
In fact, the bank statements are a very important element considered by mortgage lenders. However, many people are unaware of exactly what we lenders are looking for in these statements.
A lender wants to make sure you have enough money in the bank to cover your costs when it comes to the down payment, along with any closing costs.
In some cases, the lending organization may also want to see if you have enough money in the bank to cover the first few months of the mortgage. Underwriting departments tend to worry that people may try to buy before they are truly financially capable of getting the home they are trying to purchase.
Not only are they looking to see if the money is in the account, but lenders will also want to verify that the money truly belongs to you; and further, that it has been in the account for a while. The goal of the underwriters is to make sure that there are no hidden debts, and that all of the sources of the funds are legally acceptable.
They are going to look for deposits that are not a part of your regular income. This could include money that’s been borrowed, gifts, or a cash advance.
For example, someone who is trying to get a substantial loan (such as a mortgage) could have a parent or friend add money to their account to cover closing costs or down payments; this type of financial gift is perfectly legal, as long it is documented & not made to appear as though more money is in the account than typical.
The underwriters are going to study the bank statements to help explain all deposits and prevent that type of duplicitous action.
Those who have a large sum of money that they are going to add to their account should add it and then let it sit in there for several months before trying to get a loan.
The loan officers are also going to be looking at any instances of non-sufficient funds in the account caused by you withdrawing money, or money being withdrawn via an automatic payment. If there are a number of these instances on the bank statements, it signals to the lenders that you are not financially responsible, and they will be hesitant to lend money to you.
If you have had these issues in the past, you will want to wait a couple of months before submitting your statements so they do not show these issues. If you can’t wait, make sure that you are able to explain with a good reason why you had the NSF on the bank statement. Keep in mind, even an NSF NOT on the months reviewed, the statements will usually show NSF to date totals that can bite you.
The lenders are also going to examine all of the automatic payments you have coming out of the account. This lets them determine how much money you have in income that is available to pay the potential mortgage.
Applying for a loan can be nerve-wracking. Along with selecting the right lender to guide you, making sure you take the time to get all of your finances in shape, including your bank statements, before you apply is a tremendously important step on the road to home ownership.
For the experience and guidance you need, apply online or get in touch with us at The Weeks Team today at (985)300-LOAN.