We once had a borrower who qualified for financing in every way (income, assets, credit, etc.) but she was denied financing.

The reason? She had five unexplainable overdraft charges on her bank statements that indicated she could not manage cash.

Every borrower has to provide bank statements for every account used for “cash to close” (down payment and closing costs).

There are no exceptions b/c lenders have to ensure that down payment funds were not recently borrowed or obtained through illicit means.

“Borrowed” down payment funds are not considered “seasoned” and they create debt ratio issues b/c they need to be paid back.

In any case, lenders are required to go through every bank statement with a fine-toothed comb to look for every irregularity.

Irregularities include overdraft charges, unusually large deposits, and unexplained regular monthly deposits or withdrawals, among other things.

Unusually large deposits have to be paper-trailed and explained or they are assumed to be borrowed funds (and they can’t be used for a down payment/closing costs funds).

And unexplained regular monthly deposits and withdrawals often indicate the existence of undisclosed side businesses, support payments or other liabilities.

In any case, borrowers often get frustrated when we ask them to explain so many things that are buried in their bank statements.

But, we have to ask b/c bank statements tell lenders so much more than meets the eye.

This is, in fact, often one of the most time-consuming aspects of the loan approval process.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167

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