Check it out

When you apply for financing, we’ll likely ask you for your last two bank statements. Here’s a quick run down of what we’re looking for.

Many single people have put their parents on title as joint owners of their account, just to be sure someone can get to the money in case of emergency. We need to know the money used for closing is actually “yours”, so your co-owner will be asked to sign a statement that you have 100% access to all funds in the account. I know it’s awkward for grown adults to ask their parents for a “permission slip”, but be ready to provide it.

Since USDA loans have an income limit for the “household”, having joint owners on your bank statement also tells us we need to know the co-owner’s income situation.

If you are being asked to show proof that you’ve made a certain payment for twelve months, having a co-owner on your bank account may indicate it wasn’t really you or your money making the clean payment history.

If you have your payroll or retirement deposited directly to your account, that’s easy. It’s other large deposits that cause questions. You’ll likely be asked for a copy of the deposit and an explanation of where it came from. Remember that cash deposits are a big problem in the mortgage world, because we can’t “source” it.

And if you’ve received a “gift”, there are restrictions about who that gift can come from, and documentation requirements about your donor. Usually you and your donor will need to sign a form letter attesting that the money is a gift, that no repayment is required, and that you are family to each other. The donor also needs to show their bank statement to prove they had the funds to give you. Since that can seem like an intrusive request, best to talk about it up front.

Overdraft is a great safety net, but if your statement shows you use it regularly, you’ll have some explaining to do. Most banks now show a year-to-date tally, and repeated overdrafts seem to suggest financial mismanagement. Be careful.

Last, the transactions on your account history are reviewed. We’re catching undisclosed monthly expenses this way. Be sure you talk about all required payments on your application. Child support or federal repayment programs need to be included in your debt ratios.

Yes, it does seem extremely invasive to be judged on how you use your checking account. Investors are taxed with proving consumers have the means to repay a loan, so be ready for the inevitable interrogation.

Tammy Engel is your local Mortgage Advisor and has been working for your best interest since 1990. Contact her at 661/822-7325 for purchase, refinance, and reverse mortgage.