Decoding Mortgage Lenders’ Criteria in Bank Statements

It’s important to understand what mortgage lenders look for when reviewing your bank statements.

Let’s look at what’s reported on your bank statement and what lenders are looking for when they review a loan. 

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How many bank statements do I need to provide?

Most lenders require 60 days of bank statement history. This usually equals the last 2-3 statements, depending on when the start and end dates for transaction history land.

Banks will require all pages, even blank ones. At the bottom of the statement, you’ll see “page 2 of 10,” for instance. Supply all 10 pages, even if blank.

You can request official copies of your statements by visiting your local branch. If this isn’t an option, you can usually print these from your online account or email them directly to your lender.

And now, some lenders can receive a history directly from your bank via a third-party service, with your permission.

So, what do mortgage lenders look for in bank statements?

At this point, you know that mortgage lenders like to review bank statements as part of the underwriting process. But what you may not know is why. Here’s what they’re looking for. 

1. Do you have enough money for a down payment?

A down payment is a big part of securing a mortgage. Without this, you’re unlikely to receive approval. So, lenders carefully examine your bank account statement to ensure that you have enough money on hand for your proposed loan down payment. 

While it’s not always necessary, a down payment of 20 percent or more is preferred. Not only do you gain immediate equity in your home, but a down payment of this amount helps you avoid private mortgage insurance (PMI).

2. Did you receive money from an outside party?

Depending on the lender and type of mortgage loan, you’re permitted to receive some or all of your down payment as a gift, such as from a parent or other family member. However, there are stipulations. You need to document the gift with a gift letter, while also providing proof of receipt.

Tip: Be sure that the person giving you the gift is okay with the stipulations set forth by your lender. 

3. Where do your deposits come from? Do any of them look suspicious?

Most deposits will check out just fine, but if any of them look suspicious — such as one that is much larger than typical — you may have to provide an explanation. 

Just the same as deposits, most lenders will look for debt payments that are not listed on your credit report. These can impact your ability to repay your mortgage. 

Fortunately, as long as everything is legitimate, you’ll be able to work past this. All you have to do is document the source of the deposit and/or withdrawals. 

4. Do you receive regular monthly deposits?

Mortgage lenders want to see regular payroll deposits. They look at this for two reasons. One, they want to ensure that there are regular monthly deposits related to your employment. And secondly, they want to ensure you earn enough money to cover your proposed monthly payment. 

This is especially true when applying for a bank statement loan, which is a loan that relies completely on bank statements for qualification.

Note: If you have self-employment income and not getting a bank statement loan, read this article to understand better how mortgage lenders calculate it. 

5. Do you have the funds to cover closing costs along with a down payment?

It’s not enough to have a regular source of income and a down payment. You also need funds to cover closing costs. This includes expenses such as prepaid taxes, insurance, and administrative fees. 

Your lender can provide an estimate of closing costs so that you can budget accordingly. Also, you can expect a HUD-1 Settlement Statement that outlines charges and credits to both the buyer and seller.

6. Are there overdraft fees? 

Everyone makes mistakes now and again. It’s a fact of life. So, it’s not the end of the world if you have an overdraft fee on your bank statement. There are many reasons why this could happen, some of which are out of your hands.

What you want to avoid are consistent overdrafts. If this happens repeatedly, it shows an inability to manage your finances. If combined with other red flags — such as a good but not excellent credit score — you’re harming your chances of approval.

If you know that you have overdraft fees, take the time to explain the reason for them. This gives your lender something to think about when they get to this part of your bank statements. 

Bottom Line

If you’re applying for a mortgage (or any other type of bank statement loan), you should expect that your lender will want to review two to three months of bank statements. 

There’s no way around this — outside of paying cash — so you need to get on board with the idea of quickly providing these documents.

With so many mistakes lurking as you search for a home and apply for a mortgage, you must move forward in a calculated and concise manner. Securing the necessary bank statements early on gives you one less thing to worry about down the road. 

It also positions you to receive a mortgage approval that allows you to purchase your dream home. And that’s what matters most! 

If you’re ready to get pre-approved, get started with My Perfect Mortgage and we’ll match you with the right lender.