Why lenders require bank statements
One of the critical documentation that your lender might ask for during a mortgage loan application process is your bank statements. The mortgage lender uses the bank statements to assess and verify the borrower’s credit history and the ability to repay the loan on the specified period. The lender uses the information provided for on the bank statements to see if the borrower can cover the down-payment expenses from the existing checking or savings accounts.
The lender, usually a bank, needs to check and verify the information provided for on the bank statements before deciding to either deny or grant a mortgage to the borrower. The critical information provided for on the bank statements is essential for the lender to come into a definitive conclusion on the borrower’s repayment abilities.
There are certain features and information that the mortgage lender dreads to see on a bank statement, which necessitates the denial of the mortgage to the borrower. The loan denial can sometimes be stressing, and it is necessary for the borrower to have prior knowledge on what the lender fears seeing on their bank statements. The information will help the borrower make the required arrangements to ensure that their bank statements are in the correct form with the essential information to ensure that the lending facilities approve their bank statement mortgage loans.
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What lenders fear to see on bank statements
The mortgage lender usually does thorough scrutiny of the borrower’s bank statements to decide on whether to deny or grant a mortgage. Some information or lack of sufficient information appearing on the bank statement might prompt the lender to decline to offer the requested mortgage by the borrower. Below is a highlight on some of the factors that the lender will freak on when scrutinizing your bank statement;
- When the amount in the checking or savings in savings account falls way below the projected down-payment expense
- If the source and seasoning of the borrower’s assets do not reflect on the bank statements, which determines the source of the borrower’s money and for how long they the funds have been in the account
- Indications of the lender trying to use another loan to finance the mortgage’s down-payment. Many mortgages lenders freak upon the idea of the borrower using another loan to finance the down-payment for the mortgage down-payment. Suspicion of a borrower using another loan to finance the down-payment is an indication of the inability of the borrower to service the loan in future
- When there are discrepancies in the assets listed on the application forms, including a difference in names and ownership rights. Such gaps are an indication of the falsification of documents to gain favor from the lender.
- If the money declared on the bank statements is not sufficient enough to cover for the closing cost of the mortgage.
The borrower should ensure that the information provided for in their bank statements are in order and facilitate the provision of any missing information. The information will help the borrower in arriving into a decision relating to the mortgage.