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June 13th, 2013

Why you need to provide bank statements when buying a home

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Below is a post by Gabriela Islas, first appearing on our partner site the Zing blog at Quicken Loans:

mortgage appFor some people buying a home, the amount of paperwork required may seem a bit overwhelming. I remember when I was in the process of buying my first home, I kept thinking “Why don’t you just ask me for my first born, already?” I felt like some of the information asked from me wasn’t even necessary. For example, why exactly do lenders need to have all pages of my bank statement? Don’t they just need to see my balance and that’s all?

Well, it wasn’t until I started working in the financial industry and bought my second home, that I understood some of the reasons behind these requests from the mortgage banker.

Verification of Assets When Applying for a Loan

First, let’s talk about why you need to provide up to 30-day history. The bottom line is that lenders need to verify that all assets included in the loan application belong to the person(s) applying for the mortgage loan. The best way to do that is by looking at, at least, a month’s worth of statements.

A few things to keep in mind

  • If there are any additional deposits made to your account, in addition to your regular income, be prepared to document where these funds came from. If, for example, these funds came from a separate savings account, then you’ll have to present a 30-day history of that account, as well.
  • Lenders have to verify all the assets that will be used for your home purchase. They will be looking into your cash flow and make sure you have the funds needed to close on your loan and to make the monthly payments. They also need to verify that the information provided on the loan application matches these statements.
  • If you’re thinking about using unsecured funds (i.e. a cash advance on a credit card) – don’t! These types of funds can’t be used to buy a house. Besides, you wouldn’t want to pay incredibly high interest rates on this cash advance, would you? You would be basically paying interest on interest.
  • If your parents/aunt/uncle/cousin/grandma were thinking about helping you pay for your new home, keep in mind that, depending on the type of mortgage loan you’re getting, the person giving you this awesome gift may have to provide bank statements of the account(s) the money is coming from.
  • If you apply and take out another loan while in the process of getting your home loan, then your mortgage banker will have to take that new loan into account and recalculate how much you qualify for. In other words, avoid getting new loans or credit cards while you’re in process of getting a mortgage.

So there you have several reasons why your mortgage banker asks you for all these documents. And you even got some additional tips on what to expect as you’re going through the asset verification process. Even though gathering all these statements is sometimes painful, it is so worth it because, at the end, a home will be all yours to enjoy!

Related Links:

What to Look for When Buying an Energy-Efficient Home
Preapproval vs. Prequalification
Setting the Right Expectations for House Hunting

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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