Applying for a mortgage is often compared to trying to find your way through a maze. You have lots of questions and I, Jodi Habel, hope to answer all of them and provide you with a sense of clarity about the process. You can expect to provide a lot of documents and records to your lender for them to be able to determine whether you are a reliable borrower or not. A bank statement is one of those many records that your lender will look at, but why? Whether you’re going to apply for a first-time homebuyer mortgage or a second home mortgage, it’s important to know the significance of your bank statements when applying.
What Do Mortgage Lenders Look At in a Borrower
As a borrower, it’s important to understand the documents and records your lender will need to look at when you apply for a mortgage and the significance of each one.
- Credit score — Your credit score is a three-digit figure that ranks how well you have repaid loans (small and large) in the past. A lender can get a good idea of how trustworthy of a borrower you are through your credit score so the higher it is, the better.
- Income-to-debt ratio — Your lender needs to assess what means of financing you have right now to be able to cover your mortgage repayments. They will look at the specifics of your income and any existing debt to determine if you will be able to financially handle undertaking a mortgage.
- Bank and credit card statements — In addition to your income, a mortgage broker, bank, credit union, or other lenders will ask for your bank statements, tax returns, and other documents to understand your current financial standing. That includes your checking and savings account.
The Significance of Bank Statements
What conclusions can be made from your bank statement to determine if you are a reliable borrower or not? A mortgage broker or other lender can take a look at your spending habits, check how regular or irregular your income is, whether or not your current checking balance is yours or the finances were transferred to you by another person, and whether or not you have bounced checks or other suspicious activity on your statement. From all of that, it will easily become apparent if you qualify for a loan or not in the eyes of your lender.
FAQ About Bank Statements
I get asked a lot of questions about bank statement information related to the mortgage application process. You may be asking yourself these exact questions right now.
- Which mortgage lenders don’t ask for bank statements?
You may have difficulty finding lenders that won’t ask to look at your bank or credit card statements before granting you a mortgage, especially if you are self-employed and show minimal income on your tax return. Keep in mind that your bank statements say a lot about your spending habits, which will help the lender determine whether or not you will be a reliable borrower.
- Do lenders check bank statements before closing?
Typically, your lender will not double-check your bank statements shortly before closing. Lenders are only obligated to verify your bank statements after you submit your loan application to decide whether or not to approve you for a mortgage.
- How many months of bank statements for mortgage applications do I need to provide?
Lenders often ask for and check two months’ bank statements or more if you are self-employed throughout the application process. You must supply bank statements for any accounts that you currently hold money on and will use to qualify for the mortgage, including checking and savings accounts.
- How can I get a statement from the bank?
You may already have easy access to your bank statements since they are frequently sent to your email in PDF format. If you need a specific timeframe or your most recent statement, then you can get in touch with your bank. Most institutions also offer self-service online statements which are easily obtainable.
- Can banks see your other bank accounts?
Your financial information is private, and that means a bank can’t see your history, balances, or other information if you are a user of another bank.
If you’re looking for a mortgage broker in Canada to help you finance major life milestones, then get in touch with me today.