What do mortgage lenders look for in bank statements?


When you take out a mortgage to buy a home, the lender needs to make sure that your likelihood of default is low. A lender will ask for lots of information to get an idea of ​​your financial situation and whether you are safe, including your employment and income records and existing loans.

One of the things that you will need to show with your application is your bank statements – a summary of the funds that are being deposited and withdrawn in your bank account.

Why do mortgage lenders need bank statements? because Lenders want to know your past financial history so they can be sure that you can pay your mortgage payments on time.

A lender can look out for the following points when looking at your bank statements:

  1. Regular and even income: Bank statements help ensure that your income is coming in consistently. The lender wants to see the frequency of income, the net amount and how long you have received wages.
  2. The pattern of spending from your account: Your lender will review your typical expenses to determine if you will have adequate funds to pay the installment after taking out the home loan. They will also consider any other liabilities that you may not have mentioned to them, such as direct debits from your account. If you are applying for a loan with your partner or spouse, they may want to see both accounts together. This helps see the family’s income and expenses as a unit. If your account goes to zero or goes overdrawn almost every month just before your next salary is due, lenders may suspect that you will not be able to comfortably pay the mortgage installment. You will also want to know that once you take out the mortgage, you will be able to pay for existing basic benefits such as insurance or child education fees.
  3. How fiscally responsible are you: When there are dishonorable payments or late charges on credit cards or utility bills, it can trigger a red flag in the lender’s mind.
  4. You have the money to deposit: Banks prefer borrowers who can deposit 20 percent or more of the home’s value. Regardless of whether you set that exact amount, or more or less, your lender may want to see this in your bank account before approving the loan. This is one more thing that they may confirm by going through your bank statements.

Before applying for a loan, you should develop habits that will show lenders that you are making a responsible decision.