Let's Talk Bank Statements

If you're applying for a mortgage loan, chances are good that you'll be asked to produce bank statements.

Your loan officer will probably ask to see bank statements for checking, savings, investment, and/or retirement accounts.  And you will probably need to show a two-month history.

If you receive bank statements every month, you'll provide the most recent two months' statements.  If you receive statements quarterly, you will only need the most recent quarterly statement.

If you don't receive paper statements in the mail anymore, you should be able to print statements on your bank's web site.  Look around until you find the online hiding place for statements.  They'll look exactly like the statements you once received in the mail (assuming you're old enough to remember old fashioned things like snail mail).

If you can't find your bank statements online, call your bank.  They'll be happy to print a copy for you.

Internet print-outs are only acceptable if they clearly show the name of the bank, your name, and your account number.  Some do and some don't!  Take a look at the examples below.

The first Internet print-out is perfectly acceptable.  It clearly states the name of the bank, Sally's name and address, and her account number.  It also shows a full 60-day history.

The second print-out would not be acceptable.  What is the name of the bank?  Who is the account owner?

Print-out #3 also works.  It clearly shows the account holder (Sally Homeowner), the name of the bank, and the account number.

The last one is kinda tricky.  It has the name of the bank and account number.  But it doesn't work because we don't know the account holder.  And it doesn't show a history.  It's a snapshot in time.  We want to see all deposits and withdrawals for a 60-day period.

Transaction History

You might also be asked to produce a transaction history at some point in the process.  For instance, if your bank statement cuts off on 11/30/2017 and your earnest money clears your bank account on 12/10/2017, you might be asked to produce a list of debits and credits to your account from 11/30 through 12/10.

Be sure to follow your loan officer's directions carefully!  There can't be any "gaps" in the period of time your bank statements cover.  For instance, if your last bank statement cuts off on 11/30, you wouldn't want your transaction history to start on 12/5.  The "missing" period between 11/30 and 12/5 would have to be documented.

You can probably print a transaction history from your bank's web site.  Or have the bank print it for you.  It's likely that a transaction history isn't going to show the level of detail that is provided on your bank statement.  But we need enough information to be able to match the transaction history with the bank statement.

Cash to Close

The amount of money you need to show in your bank account will vary depending on the transaction.  Ask your loan officer!  For most transactions, you only need to show that you have the necessary amount to close the loan or "cash to close" (usually down payment plus closing costs).

Some loans also require "reserves."  Reserves refer to savings or cash that you'll have in the bank after closing.  You don't have to spend the money.  Just show that you have it.  Reserves are usually measured in number of months' mortgage payments.  For instance, if your proposed mortgage payment(s) is $1,500/month including taxes and insurance, three months' reserves = $4,500.  Some examples of mortgages that require reserves include jumbo loans, non-conforming transactions, investment properties, vacation homes, and loans which require manual underwriting.

You will also have to "source" your funds for down payment.  That means you'll have to show the underwriter where every dollar of your cash to close comes from.  Let's say you need $100,000 to close your transaction. 

Check out the transaction histories below.  In the first example, the customer has the necessary funds at the beginning of the period.  He has money coming in and going out, but nothing that appears to be unusual.  The transaction history is sufficient for "sourcing" the customer's cash to close.

Now check out the next example.  This customer only has $30,000 at the beginning of the period.  How did he go from a beginning balance of $30,000 to an ending balance of over $100,000?  In addition to his regular paychecks from Acme, Inc., he also transferred $25,000 from another bank account and deposited another $42,000 at the bank.  He will need to document these large deposits to show where that money originated.

What Else?

In addition to documenting cash to close and large deposits, the underwriter will examine your bank statements for the following:

• Is there a co-owner on the bank account who isn't on the mortgage loan?
• Are there any charges for insufficient funds (including automatic transfers)?
• Are there any negative balances?
• Are there reoccurring payments for potential debts that might not be listed on the loan application?
• Are there reoccurring deposits that could be additional income that hasn't been considered?

Are retirement accounts an acceptable source of cash to close?  Usually.  Ask your loan officer.  Retirement accounts will require terms and conditions of withdrawal.  This is usually found on the provider's web site.  It will document the conditions under which you are allowed to withdraw funds from the account.  Some retirement plans only allow withdrawals to be made under certain hardship circumstances (to pay for medical bills, the birth of a child, or college education expenses).  Other plans allow withdrawals at any time for any reason.

Are business accounts acceptable?  Usually.  Again, check with your loan officer.

One more thing worth noting:  Always provide all pages of your bank statements, even if the last page is completely irrelevant.  Your bank statement might include worksheets for balancing your checkbook, a whole page of legal disclosures, or even blank pages.  But if the pages are numbered, your underwriter will want to see every single page to make sure she's not missing anything.

The last page of my Kitsap Bank statement is a list of local events!  I would still need to provide this page if I was applying for a mortgage.