Do Lenders Check Bank Statements Before Closing?

Yes, they do.

One of the final and most important steps toward closing on your new home mortgage is to produce bank statements showing enough money in your tài khoản to cover your down payment, closing costs, and reserves if required.

When you’re buying a new home and approaching the finish line, emotions are high and timing is tight.

This is NOT the time to find out that your loan officer did not properly explain how important your bank statements will be at the closing table.

I received a question from one of our readers last week. Reading deeper into the question, there’s much more here than meets the eye.

The Question

I am closing on a home in November. I know my bank tài khoản has to show the amount for closing. Does it have to show at least one mortgage payment amount also?

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Thanks,
Rhonda

What Do Underwriters Look For in Bank Statements

Simply having money in your bank when you’re at the closing table is not enough. The underwriter will review your bank statements, look for unusual deposits, and see how long the money has been in there.

The industry term for this underwriting guideline is the “Source and Seasoning” of your funds being used to close. Before the lender fund the loan, the underwriter will have to sign off on your bank statements.

How Many Bank Statements Do Mortgage Lenders Require?

Lenders typically request two months of statements for each of your bank, brokerage, and investment accounts.

Deposits made into your accounts prior to the most recent two months asset statement are considered seasoned and do not have to be sourced. The seasoning requirement for most lenders is typically statements covering the most recent 60 days prior to closing.

They’re looking for where the cash came from, to determine whether you have received a gift or some other factor that will make you look good at that point in time but won’t be available in the future to help you make your required mortgage payments.

The source of your funds is not necessarily where the funds are transferred from a savings tài khoản into a checking tài khoản, but they will look for more verification that the funds have been in your tài khoản, and can be documented on the most recent two months’ statements.

Deposits made into your tài khoản prior to the most recent two months asset statement are considered seasoned and do not have to be sourced. The seasoning requirement for most lenders is typically statements covering the most recent 60 days prior to closing.

Closing Costs and Reserves

When calculating how much you need in your tài khoản at closing, you should consider both closing costs plus any reserves required by the loan program you are using to buy your home.

Closing costs and reserves differ in that closing costs must be spent, and reserves only need to be saved, documented, and accessible in an emergency.

Understanding Closing Costs

Closing costs need to be wired from your bank tài khoản to the closing table, whether it be an Attorney, or Escrow Company, depending on what area of the country you’re buying in.

Closing costs may include, but are not limited to:

Closing service fees (escrow or attorney fees)
Title search fees
Recording fees
Transfer taxes
Lender fees
Pre-paid interest
Pre-paid impounds (taxes and hazard insurance)
Pre-paid HOA fees (homeowners association)

Understanding Reserves

Reserves only need to be verified and are not required to be withdrawn. Reserves are liquid funds that you could have access to if you had to.

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Reserves are typically measured in months of reserves in terms of having a determined number of months of PITI (principal, interest, taxes, insurance) in savings, and available for withdrawal.

Reserves are most common with low credit score FHA loans, and most Conventional, Jumbo, and Portfolio Loans.

FHA and VA typically will not disqualify you through the automated underwriting system if you do not have reserves, but if you have trouble getting an automated underwriting approval, having reserves can offset risk as a compensating factor.

Common sources of reserves may include, but are not limited to:

Checking or savings tài khoản
Cash value of life insurance (if withdrawal is allowed)
401k or other retirement accounts (if withdrawal is allowed)
Cash value of stocks, bonds, or other liquid assets

Reserves can be tricky because they can vary greatly from one loan program to another, and are also a common “overlay” added to the underwriting guidelines by a lender.

It is not uncommon for a lender to consider reserves as a compensating factor that may allow them to accept higher risk areas of your application, like low credit scores or high debt to income ratios.

It is also not uncommon for a lender to simply impose reserve requirements to filter out loans that they perceive to be of higher risk of future default.

Using Gift Funds?

Most loan types allow you to use gift funds for closing costs and/or reserves. Gift funds can almost always be accepted by a close family member like a mother, father, sister, or brother.

The best way to accept gift funds is to have the donor wire the funds directly to the closing table. Most underwriters will ask for statements from the donor to verify that they had the money available to gift.

The gift-giver must also sign a Gift Letter stating their relationship to you (the buyer), the amount of the gift, and the understanding that the money is a gift, and is not expected to be paid back.

Gift funds are seasoned the same as the closing cost and reserve documentation requirements, which is typically statements covering the most recent 60 days prior to closing.

NOTE: Gift funds deposited into your tài khoản prior to the most recent two months’ tài khoản statements are considered seasoned funds and do not have to be sourced.

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Frequently Asked Questions

Is It OK To Move Money From Savings To Checking Before Closing?

Generally, moving money from savings into checking, so you can have the cash available to write a check to close on your house, is not considered a problem. Your lender may wish to see a few additional months of statements on your savings tài khoản to verify the source of that money prior to the move.

How Many Bank Statements Will Be Required For Mortgage Approval?

Most lenders will request 2 months of statements for each of your bank, retirement, and investment accounts, though they may request more months if they have questions.

Why Do Lenders Need Bank Statements?

One of the things a lender looks for before approving a loan is your overall financial situation and reserves. They’re looking to see how much money you would have available to be able to make your mortgage payment in case of hard times like losing your job, being unable to work due to injury or sickness, etc. without having to sell assets. Reviewing all your bank, retirement, and investment tài khoản statements enables them to see how large of a reserve you have on hand.

They are also looking for “sources of funds” wanting to make sure that deposits into your accounts can be reasonably explained. Basically, they are checking to see if you have received gifts of money that make your finances look better than they actually are in the long term.

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