In assessing a mortgage application, it is common practice for lenders to request a bank statement from the borrower. This is a record of all your transactions that have taken place over the past months.
The lender will most likely see the most recent two months of your bank statements and look at specific aspects you must remember. They are the following:
Bank Statement Details You Must Remember
- Spending Habits. A list of transactions is not enough for a lender to determine if you are a good candidate for a mortgage. They also want to know if your spending is under control or if you are a responsible spender. This is why a lender may evaluate your spending habits and look at how much money you spend on entertainment and shopping. If you are spending more than you earn, it may be an issue you want to fix when applying for a mortgage.
- Your Income. The lender wants to make sure you are making enough money to cover the cost of your mortgage and living expenses. They will compare your income with your spending to see if you are spending all the money you earn on essential costs, i.e., the expenses you absolutely cannot live without. Avoid spending money on extra things.
- Savings. Your lender will also closely look at your savings. This applies to your savings account as well as your investment portfolio. You should have a substantial amount of savings to be able to make your mortgage payments when they come due. If you are not sure that you have enough savings to make your payments, consider paying more than the minimum balance on your savings accounts.
- Credit History. Your lender will look at both your checking account and credit card statements. They will be looking at how many times you use a specific card, how many times you ask for cash advances, and how many times you have used credit. These are all factors that indicate your financial responsibility. Your credit history can either speak in your favor or against you. If you have too many credit cards or you use credit cards frequently, your lender may be wary of giving you a mortgage. So, keep this aspect in mind.
- Disposable Income. Disposable income is money you have left over after paying your necessary expenses. A lender will look at your disposable income to see if you have enough money to cover your mortgage payments. If you spend all the money you earn, it may be difficult for you to make your loan payments. On the other hand, having some disposable income can help you with your mortgage payments.
- Debt Load. Your lender will also look at how much debt you have. They will want to know if you have too much obligation to be able to pay off your mortgage. If you do not have significant debt, you are less likely to pay off your mortgage for more than 25 years. If you are in debt, the lender may conclude that you are less likely to be staying in one place for that long.
Final Note
Your bank statement can speak volumes about your finances and your overall stability. When applying for a mortgage, your lender will look closely at your bank statements to see if you are responsible and if your income matches your spending.
They will also look at your credit history to see if you are burdened by too much debt to be able to pay off your loan. Your bank statements may explain a lot about your financial situation; consequently, you may need to talk to your lender about other aspects of your application.
Contact Our Mortgage Specialist Today!
If you are looking for a conventional mortgage, turn to Mortgage City. We are a mortgage originator licensed in Michigan, Florida, New Hampshire, Ohio, Massachusetts, Texas, California, Indiana, and Colorado. Call us today at (248) 930-8709.
