Mortgage lenders typically require borrowers to provide bank statements as part of the loan application process to verify their income and assets. Bank statements provide lenders with important information about a borrower’s financial situation, including:
- Income: Lenders use bank statements to verify a borrower’s income, which is used to determine the borrower’s ability to repay the loan. Bank statements can also be used to confirm that a borrower is receiving regular deposits, such as paychecks or rental income.
- Assets: Lenders use bank statements to verify a borrower’s assets, such as savings and investment accounts. This information is used to determine a borrower’s net worth and to determine the size of the down payment.
- Liabilities: Lenders use bank statements to verify a borrower’s liabilities, such as credit card balances and car loans. This information is used to determine a borrower’s debt-to-income ratio, which is used to determine the borrower’s ability to repay the loan.
- Financial stability: Lenders use bank statements to determine a borrower’s financial stability, such as regular deposit, consistent savings pattern, etc.
- Bank statement loans: For bank statement loans, the lender uses the bank statements to calculate the average balance over a period of time, usually 12 to 24 months, which is used to determine the borrower’s monthly income.
By requiring bank statements, lenders can get a more complete picture of a borrower’s financial situation and can make more informed decisions about whether to approve a loan and what loan terms to offer.