Have you ever wondered why a lender needs to see your bank statements? There are two primary reasons bank statements are needed in the home buying process, to verify funds and the source of those funds.
Lenders will review your statements for two primary reasons. One of which is to review the deposits in the account to verify the source of the funds. If you get paid on the 1st and 15th of the month then your bank statements should reflect those amounts which should also match your pay check stubs. Lenders also need to verify the source of all deposits. If there are any deposits that cannot be accounted for, no matter how legitimate, the ender may choose not to count those funds. If you have more than enough needed to cover your closing costs this shouldn’t be a problem but if not then be prepared to not only explain where the extra funds came from but document the source.
For instance, let’s say you sold your car, bought another yet had some money left over. By documenting the sale of the automobile and match that sale up with your bank statements your lender can count those funds. Essentially your ender wants to make sure the funds in your accounts are yours and came from a verified source and not funds that were borrowed from a third party or a credit card account.
Your lender will ask for your most recent bank or investment statements containing the funds needed to close your loan. Whatever accounts you list on your initial loan application will need to be verified. This includes a retirement account or IRA. If you show that you have a 401(k) account you can be expected to provide evidence of this account, even if you don’t intend to tap into the 401(k) to buy and finance a home.
With business bank statements it gets a little trickier as deposits can be for different amounts and made on different days of the month. Lenders understand this and you can use funds directly from a business bank account or otherwise transfer the funds from a business to a personal account but be prepared to provide some documentation to the lender prepared by an accountant that the withdrawals from the business account won’t materially affect or otherwise harm the future of the business.
Finally, if there are two names on a statement and one of the parties is not buying the home the lender will assume you own half the amount with the other half to the other person. If you need all the funds and there are two names on the account your lender may ask that the other person write a statement saying it’s okay for you to use any amount of funds you wish.
When a lender asks for bank or investment statements it’s just another way to verify income as well as the assets belong to you and you have access to them. If you get asked a question about a particular deposit, it’s because the lender must verify its source.