Applying for a mortgage is a huge event in your financial life, and making sure you receive approval for the mortgage you need and want requires a little advanced planning. One area of your financial picture you need to optimize to increase your chances of receiving the best mortgage is your Bank statement . Most people aren’t aware the actions they take with their bank account leading up to applying for their mortgage, or during the application process, can have a huge impact on their ability to receive approval for their loan. Here are some of the biggest bank statement mistakes you can make without knowing it, and how you can mitigate any damage from necessary faux pas.
The first thing you should do is keep all of your cash and assets in one place. If possible don’t transfer any money around, don’t liquidate any assets, and otherwise try to create a very stable and static personal financial picture. When you’re applying for a mortgage your prospective lender is going to look at all of your income and assets and make sure they are where you say they are, in the amounts you say they sit in. If you transfer money around during the application process your prospective lender will have to trace all of those transactions, making their job more complicated and more error prone. As best as possible, avoid moving around your assets and cash throughout the entire application process.
You also want to avoid making any huge changes to the amounts in your financial and asset accounts. One of the worst things you can do during your mortgage application process is receiving huge deposits in your account. It’s common for individuals to receive large cash gifts from relatives when they’re applying for a mortgage to make their cash-on-hand appear larger than it actually is or to help pay for closing costs. If a bank sees a big deposit into your account that is not a direct deposit from your employer they will want to source that deposit. Often times the deposit is likely a gift, which requires a gift letter and needs to be sourced.
Avoiding receiving these gifts is wise, though there are plenty of circumstances when you might receive additional funds through more legitimate means. For example receiving your paycheck, receiving a bonus or commission check from work, liquidating assets… all of these actions result in an increase in your cash and shouldn’t be avoided. Instead you should simply make sure you have as much documentation as possible for these transactions. Having copies of paystubs and documentation surrounding asset sales will ensure your bank factors them into your application process appropriately.
As a general rule it’s wise to keep documentation on hand for all changes, adjustments, additions or subtractions from your bank accounts when applying for a mortgage. You never know what documentation and clarifications your prospective lender will need, and you never know what activity they might view as suspicious or otherwise problematic. It’s wise to have all of your documents together from the last 2 years, but if you’re not used to accumulating these documents it’s smart to start collecting them as soon as possible.