Bank Statement Basics for A Kentucky Mortgage Loan Approval for USDA, KHC, FHA, VA, Fannie Mae and Rural Housing Mortgage Loans
Bank statements provide a wealth of information regarding the borrower’s spending habits, monthly obligations, and income. We utilize the bank statements to verify the amount of liquid or non-liquid funds that are available for funds to close or reserves. However, there is much more to be gleaned from a bank statement with careful and skillful analysis.
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Once we have verified the current balance in each account, we move on to a line-by-line review of the transaction history. We review each item to identify the following:
• Payroll or fixed income direct deposits to verify receipt of wages.
• Insufficient funds (NSF) fees that show evidence of negative bank balances. When NSF fees are noted, it is prudent to determine which transactions caused the account to be in the negative. If the transaction is related to the housing expenses (mortgage or rent payments) this may be an indication of a late pay.
• Automated payments to friend of the court for child support obligations.
• Auto loans or lines of credit with outstanding balances that are not reporting on credit.
• Large deposits where the transaction description does not provide sufficient explanation for the source of the funds. We request letters of explanation for large deposits and documentation to source the funds. Large deposits are often an indication that the borrower has received gift funds. In this case, we will request the fully executed gift letter and proof of receipt of those funds. In addition, large deposits may be derived from the borrower drawing on a line of credit. Remember: unsecured revolving credit funds may not be used to qualify as funds to close or reserves.
We can also use bank statements as a way to verify the correct spelling of the borrower’s name and the borrower’s current address. This information can come in handy when there are name or address discrepancies on credit. Take note of any names listed on the bank statement that are not names of borrowers listed on the loan application. In this case, a detailed review of the deposits into the account is appropriate.
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Your goal is to insure the funds being used to qualify are funds that truly belong to the borrower. If the borrower is listed as an owner of the account, but all deposits are derived from a non-borrowing party, these funds may not be used to qualify. If, however, the borrower is contributing funds to the account, an access letter is required to verify the borrower has 100% access to all funds in the account. The access letter must be signed and dated by the non-borrowing party.
Bank statement analysis must go beyond evaluation of available funds. We can all do our part to mitigate risk by closely evaluating banking transactions. We can use the bank statements for a variety of things including support for the borrower’s credit profile and verification of borrower name and address. As a result, skillful analysis of asset documentation is required of all mortgage professionals.
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Senior Loan Officer
502-905-3708 cell
502-813-2795 fax
kentuckyloan@gmail.com
Key Financial Mortgage Co. (NMLS #1800)*
107 South Hurstbourne Parkway*
Louisville, KY 40222*
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Kentucky First-Time Home Buyer Programs | USDA, FHA, VA & KHC Loans 
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How to Close on Time – Assets
September 30, 2013 by Mark Aalto MLO #116708
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Finance
Finance (Photo credit: Tax Credits)
This week we’re going to focus on the role that assets play with transactions. When it comes to funds to close, improper documentation and lack of documentation are the biggest reasons mortgages close late.
Team Aalto assets tips:
Fully document all deposits. These days lenders need to know exactly where your deposits came from. If it wasn’t from an electronic paycheck deposit, you’ll need to provide a complete paper trail to your lender.
Provide all pages of bank statements and investment accounts. Yes, even the blank pages.
Request and deposit funds early. It may take two to three weeks to get 401k funds so request them early. If you are receiving a gift, get the funds and the documentation before you have an accepted offer. In both cases, your Bank may not give you access to the funds right away so the earlier the funds are deposited the better.
Stop transferring funds all over the place. Lenders need to get an accurate snapshot of how much money you have to work with – when funds are transferred constantly it makes it really difficult to verify funds to close.
We understand that finding and providing documentation isn’t the highlight of the day. Our job is to get your loan closed on time – we all need to work together to make sure all needed items are submitted to underwriting as quickly as possible.
As is always the case, provide all documentation requested by your lender at the beginning of the process – that gives us plenty of time to review your documentation and catch any things that might delay your closing.
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