Yes, as you move through the mortgage approval process, you’ll likely need bank statements to prove your income. We asked experts how many you need.
Buying a house? Congratulations! But be prepared to provide so much personal information about yourself that even you learn something new. One of those key documents is bank statements. After all, you have to prove that you (and whoever you’re buying a home with) would be a responsible borrower. It’s never a bad idea to prepare in advance so that when you’re asked for them, you know exactly what to get. How many months of bank statements for a mortgage do you need? We got the official answer from two seasoned mortgage experts.
What is a Bank Statement?
A bank statement summarizes your account activity – typically, in monthly increments. It’ll show your deposits, withdrawals, transfers, written checks and balances. Even if you don’t go for a bank statement-only mortgage, you’ll still need to provide the documents.
“If an applicant has several bank or brokerage accounts, they should be prepared to give the lenders copies of all of them,” says H. Jack Miller, president and CEO at Gelt Financial, LLC. “Lenders will want to see your name, account number and dates at a minimum on the statements. If you print screen shots or PDFs, be aware this info must be on them.”
Why Do Lenders Need Bank Statements?
A lender is taking the upfront risk of giving you a loan, so they want to analyze if you’re a worthy borrower. For example, if a lender looks at your bank statements and sees you have frequent overdrafts, it could indicate that you aren’t able to manage your finances to make a monthly mortgage payment.
“Try not to make sudden moves with your money before applying for a mortgage,” says Mike Roberts, co-founder and CEO at City Creek Mortgage. “No big deposits, no last-minute account transfers and definitely no overdrafts. Lenders want consistency. If something looks off, they’ll ask questions, and the more explaining you have to do, the slower the approval process gets.”
The Bottom Line
When buying a home, a lender is going to ask for a whole lot of information, specifically about your finances. To ensure you’re in the best spot for a loan, keep an eye on your accounts so there aren’t any overdrafts. Also, avoid strange deposits and inconsistent income when possible. When it’s time to hand over your bank statements, you want them to look reliable. The good news is, it’s easy enough to log into your online banking or get in contact with your bank to get the necessary paperwork.
Why You Should Trust Us
No matter how financially savvy you consider yourself, it’s easy to get tripped up in the details. That’s why about 25 million people turn to Benzinga each month for their finance news, as well as insight into their most basic and complex questions. We aim to speak to all sorts of potential homebuyers, no matter where they are in their home-buying journey.
Caitlyn Fitzpatrick, the author of this article, has been an editor and writer since 2014. In addition to Benzinga, her work can also be found in U.S. News & World Report, Business Insider, Reader’s Digest and more. To ensure we’re providing the most up-to-date information, we spoke with H. Jack Miller, president and CEO at Gelt Financial, LLC and Mike Roberts, co-founder and CEO at City Creek Mortgage about bank statements for mortgage approvals.
FAQ
How many months of bank statements for mortgage approval?
This depends on the lender and the type of loan you’re after, but the objective is to analyze your cash flow so the lender can feel good about your ability to pay your mortgage. However, you can get an idea of what you’ll need.
“Most traditional loans need two months of bank statements,” says Roberts. “But if you’re self-employed, have irregular income or are applying for a bank statement loan (where your income is verified through bank deposits instead of tax returns), they ask for 12 to 24 months of statements.”
What are red flags on bank statements for mortgages?
A lender will look for inconsistent income patterns, large or unexplained deposits, overdrafts and unusual transactions, as well as undisclosed debts and debts that aren’t being paid. All of these things could point to an inability to properly manage your finances.
Does FHA require 1 or 2 months of bank statements?
“Generally, FHA requires the two most recent bank statements,” says Miller. “However, if there are large deposits or inconsistencies, they may require more. If there is a gift, they will always require the bank statement showing this.”
Sources
- H. Jack Miller, president and CEO at Gelt Financial, LLC
- Mike Roberts, co-founder and CEO at City Creek Mortgage
About Caitlyn Fitzpatrick
Caitlyn Fitzpatrick has been a professional writer and editor since 2014 and entered the commerce journalism world in 2017. She’s passionate about helping readers make smart buying decisions by using data insights and interviewing experts. Most recently, Fitzpatrick was the Senior Shopping Editor at Trusted Media Brands, where she led affiliate content on Reader’s Digest. In addition to Benzinga, Fitzpatrick’s work can be found in a range of publications, including U.S. News & World Report’s 360 Reviews, Today’s Parent, Betches, WhatToWatch.com, PS (formerly Popsugar), and more.