As part of the mortgage application process, you will be asked to provide bank statements. Lenders will check your bank statements both for income verification purposes and to try and prevent fraud.

Before you turn in your bank statements, you may be wondering what might catch a lender’s attention when going over them. Below, we discuss what looks good and bad on bank statements when applying for a home loan.

Your Bank Statements Should:

• Help paint a clear and complete picture of your income. This is especially important if your W-2 does not include all of your income or if you do not have a W-2. In fact, you can apply for a special type of mortgage called a “bank statement loan” if either of these is the case.

• Show that you can afford your down payment and closing costs.

• Demonstrate that you have adequate cash reserves, and will continue to after you pay the costs above.

Your Bank Statements Should Not:

• Show unusual and unexplained fluctuations in your income levels. If you are in a situation where fluctuating income is just part of your life, you will need to provide a comprehensive, written explanation (i.e. in the case of self employment).

• Suggest you will not be able to afford the home loan and/or be unable to pay your regular bills along with your mortgage.

• Have overdrafts. Yes, overdrafts can happen to anyone—but it is really important that before you apply for a mortgage, you make sure you steer clear of these incidents. If lenders see overdrafts, they may think you do not know how to manage your money and keep up with your expenses appropriately.

• Display large deposits that you cannot explain. You cannot use a loan to make your down payment and pay your closing costs for your mortgage. So, if you have a large deposit in your account unrelated to your income, you need to be able to explain where it came from so it does not disqualify you from a mortgage. Make sure you have documentation to back up your statement.

Ask Us Your Bank Statement Questions or Apply for a Home Loan in Indianapolis Now

Now you know what lenders are looking for when they check your bank statements as part of the application process for a mortgage.

If you have additional questions about bank statements or bank statement loans, please give us a call at (317) 255-0062.

When you contact us, you can also schedule a consultation to begin the mortgage process. We look forward to helping you buy a home or refinance in Indianapolis or anywhere in the state of Indiana.