When you apply for a mortgage, one of the first documents your loan officer will ask for is your bank statements. The main purpose of checking and reviewing all these document is make sure that you actually have the funds and means to pay your house payment without defaulting.
Simply having money in your bank account does not guarantee that you will get a home loan or that the funds are legitimate. Your lender will want proof that the funds belong to you, and that the source of the money and how it was deposited is legitimate.
The best way for the lender to determine proof of funds is by looking at least 30 days or more of bank statements. Your lender will go through these documents and verify that all of the assets you included on your loan application actually belong to you.
Bank statements only show the funds in your account; they don’t automatically legitimize the money in them. The number one credit item that causes problems with potential homeowners applying for a home loan is cash deposits. These deposits can be difficult because lenders need to make sure that the deposits weren’t structured to avoid reporting requirements. Lenders will scrutinize each and every cash deposit made to your account when you are trying to obtain a home loan.
Depending on your lender’s requirements, you may need to write a clear and concise letter of explanation for each deposit. If a loved one decides to gift you your down payment for a home, this transaction will also need to be documented with a notarized gift letter.
It is very important that you carefully document your financial transactions. Your lender must be able to identify and match your statements against your deposits to ensure the information on the original loan application is correct. If there are no documents to prove where the money is coming from and how much you have, your request for a home loan will be denied.
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