Do you manage your money responsibly? If you know the financial weaknesses that are deal breakers for lenders, you can strengthen your chances of being given a loan. Mortgage lenders are trained to spot financial mismanagement, and they carefully review your application to decide whether to approve or deny you a home loan—your transaction history is critical for bank statement loans.
Lenders look for a variety of things to determine whether you manage your money responsibly. The main role of a lender in approving bank statement mortgages is to ensure that the loan applicant has sufficient funds to make a down payment, pay closing costs, and assess whether the applicant is able to make the monthly payments. Since they get most of this information from your bank statement, you should ensure that all your records are straightforward to increase your chances of getting bank statement mortgage loans.
Why your spending history is critical to getting your loan approved
Information Extracted from Your Bank Statement
Below are the two main reasons why non-qm mortgage lenders check your bank statements before approving or denying your bank statement loans.
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Verifying the Source Funds
Lenders have to verify your source of funds and determine whether it is legitimate or not. Simply having a large amount of money in your bank account does not guarantee that you qualify for a bank statement mortgage. Lenders will need proof that the funds are yours.
Lenders will determine that the money is yours after reviewing your bank statements for previous years, say 10 or 20 years. They will also go through these records to determine whether you were honest about the assets that you included in the loan application.
The Proof of Legitimacy
Even though your bank statements will show the funds in your account, they do not automatically legitimize them. The biggest credit item that will cause problems while applying for bank statement loans is cash deposits. These deposits may be challenging since mortgage lenders need to ensure that they were not structured in order to avoid reporting requirements.
Mortgage lenders scrutinize all the cash deposits that are made to your bank account when you apply for bank statement mortgages. Various lenders have different conditions, but most would need you to write a concise letter explaining each cash deposit. If a friend or family member gifts you the down payment for the bank statement mortgage, you must document that transaction with a notarized gift letter.
Keep Careful Documentation
You have to document your financial transactions carefully and concisely. Mortgage lenders should effortlessly match your deposits against your statements to verify the information that you provided while making the loan application. Applicants who cannot prove the source of their cash deposits and the legitimacy of the money are unlikely to get bank statement loans.