What Lenders Look for in Your Bank Statements

Your bank statements are a big deal in the mortgage process. Lenders scrutinize them for one reason: they need to prove where your money comes from and where it goes.

What they check

Large deposits. Any deposit over 50% of your monthly income gets flagged. You'll need to explain it. Cash deposits from a friend? A transfer from another account? A bonus? Get documentation.

Sufficient funds. Does your down payment and closing cost money sit in your account for at least 60 days? If not, they need to trace where it came from (gift funds, sold assets, etc.).

No overdrafts. Regular overdrafts or insufficient funds suggest you're not managing money well. A few are fine but frequent ones raise red flags.

Check images. If you write a large check during the application process, they'll look at the image to see who it's made out to.

Bounced checks. Any bounced checks can cause issues and require a letter of explanation.

What to do before applying

• Stop making large cash deposits
• Keep a paper trail for any large incoming transfers
• Avoid gambling transactions
• Deposit gift funds at least 60 days before applying
• Keep your balance as stable as possible

It sounds intense, but it's mostly common sense. Lenders just need to make sure you can afford the home and the money you're using is legitimate.