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Getting a mortgage involves mountains of paperwork. Between applications, statements, and forms, it can be a daunting and tedious process
One thing FHA lenders look for is bank statements.
Why?
Mortgage companies want to ensure your financial situation is stable before approving you for an FHA loan.
Here’s what lenders look for and how to improve your chances of getting approved.
Why Mortgage Lenders Need FHA Bank Statements
If you’re applying for an FHA loan, you may be wondering why mortgage lenders want bank statements.
It’s simple:
Lenders need proof you have a steady income and enough money saved in your accounts before letting you borrow money.
A bank statement is a great way to prove that you can afford your monthly mortgage payments.
What your lender looks for can vary. Generally, they want to verify:
- Account number
- Account type (checking, savings, CD)
- Whether it’s open or closed
- Whose names are on the account
- How much you have saved
The information from your statements is used to determine mortgage eligibility.
How Many Bank Statements Do You Need?
Lenders can require you to submit bank statements before they’ll consider you for an FHA loan. Each lender might have its own FHA requirements.
Lenders want bank statements for any account with funds you’ll use to qualify for the loan.
How many bank statements is enough?
Generally, you’ll need to provide statements for the most recent two months.
That usually gives them enough information to verify your savings and check for unusual activity.
It can also show if you’ve opened any recent credit accounts — anything older than two months typically shows up on your credit report.
Where to Find Your Bank Statements
Most banks store your statements for seven to ten years, so getting the past two months’ worth should be a breeze.
If you have online access to your accounts, you can print them yourself:
- Log into your bank account
- Sign up for paperless statements if you aren’t already
- Follow the menus to access your online statements
- Download or print the statements you need
Remember: The lender wants statements from any account with money you’ll use toward the loan.
So, repeat this process for other accounts you’ll need statements from.
If you don’t have online access, you can ask your bank representative or customer service department to help you get the required documents.
4 Things FHA Mortgage Companies Look for in Bank Statements
FHA lenders want a snapshot of your finances to prove you’re up to date on payments and have enough cash available to pay your bills on time after getting an FHA loan.
Here are four key things lenders look for on bank statements:
- Cash balance to cover the down payment and closing costs
- Regular deposits to make sure you can pay your mortgage payments
- Reasonable withdrawals to show lenders how you spend your money
- Reserves to act as extra cash in case of an emergency
Lenders also need to verify the source of your down payment and closing costs.
For example, if you’re buying a $225,000 home, you’ll need $7,875 for the down payment. If your bank statement only showed a balance of $2,000, the lender would wonder where you plan to get the extra funds from.
You can use a gift to cover the cost, but it must be documented — they’re primarily looking for undisclosed down payment gifts at this point.
4 Things FHA Lenders Don’t Want to See on Bank Statements
When looking over your bank statements, there are certain things lenders don’t want to see. If these items show up on your statement, it isn’t a good thing.
In that case, hold off on applying for an FHA loan.
Whether you’re applying for a conventional or FHA loan, most lenders ask for two months’ worth of bank statements. So, you may need to wait for one to two months to make sure these questionable items don’t make an appearance.
1. Overdrafts
Overdrafts, bounced checks and non-sufficient funds (NSF) charges are red flags. Lenders see it as a sign that you’re not doing a good job of managing your finances.
Your lender may require additional financial documentation if your statement includes these items.
And that can slow down your loan and put off your closing date.
2. Unstable Income
You need to have the means to repay your mortgage once you take it out. Your income doesn’t need to be from an employer — it could include paychecks, royalties or court-ordered payments like alimony or child support.
But one thing is sure.
Lenders want stable income. Anything less can be a cause for concern.
3. Low Account Balance
Closing costs can add up. According to the Consumer Financial Protection Bureau (CFPB), the average homeowner pays $7,435 in closing costs.
That’s a pretty big chunk of change.
If your account balance is low, how will you cover those fees?
FHA loans allow friends and family to help cover closing costs.
But the gifted funds require documentation and a statement that you won’t need to repay the money.
4. Unexplained Withdrawals
Regular withdrawals are standard. You might withdraw funds for utility bills, insurance payments, groceries, or other spending.
But large or unusual withdraws can signal trouble during the application process.
Your lender might think you’re using the money to repay a loan from a family member or friend, or that you have a gambling or other addiction that’s costing you big.
Either way, it could cause your lender to decline your application.
Do You Qualify for an FHA Loan?
Bank statements play an essential role in qualifying for an FHA loan. But it isn’t the only thing they look for…
Lenders will also review your credit score, credit history report and employment.
That’s why you need to work with a lender you can trust.
Let the Wendy Thompson Team help you feel good about your mortgage. Start with a free quote today!
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