Bank Statements: 3 Things Mortgage Lenders Don’t Want to See

What do mortgage lenders look for on bank statements?

When you apply for a mortgage, lenders look at your bank statements to verify that you can afford the down payment, closing costs, and future mortgage payments. They also verify consistent income and any activity that may indicate financial risk.

The more straightforward your mortgage application, the more likely you are to be approved. Understanding what lenders check in bank statements for mortgage loans can help you avoid delays.

In this article (Skip to…) 

• How far back do lenders look?
• What underwriters look for
• Do lenders check statements before closing?
• What lenders don’t want to see
• Bank “VODs”
• Bank statements FAQ
• Today’s best rates

How far back do lenders look at bank statements?

Mortgage lenders usually ask for two months of recent bank statements during your home loan application process. Accounts older than two months usually appear on your credit report. Self-employed borrowers may need to submit between 12–24 months of statements if applying for a bank statement loan.

You need to provide bank statements for any accounts holding funds you’ll use to qualify for the loan, including money market, checking, and savings accounts.

Loan officers use bank statements to assess a borrower’s financial health and creditworthiness when evaluating a loan application. Here’s what mortgage providers are looking for:

• Income verification: Regular deposits, paychecks, or other income sources that show you can repay the loan.
• Spending habits: Recurring expenses, bill payments, and debt that reflect how you manage money.
• Account stability: A steady account history without frequent overdrafts or large unexplained transfers.
• Risk assessment: Whether your financial situation supports the loan amount and terms.
• Fraud detection: Signs of false or inconsistent information that may affect your loan application.

What do underwriters look for on your bank statements?

Underwriters examine bank statements for mortgage applications to confirm that you have sufficient funds for the down payment, closing costs, and monthly payments. Here’s what they’ll want to see:

• Funds to cover the down payment and closing costs
• Regular income deposits
• Extra savings for emergencies (cash reserves)
• No bounced checks or overdrafts
• No large deposits without documentation
• No withdrawals from undisclosed debt
• No new debt taken on before closing

They also check that the money is truly yours and not borrowed or transferred from an unexplained source. Funds must be “sourced and seasoned,” meaning the lender knows where they came from and that they’ve been in your account for at least 60 days.

Do mortgage lenders look at bank statements before closing?

Your loan officer will typically not re-check your bank statements right before closing. They usually review them during the initial mortgage application process. But as the closing date gets closer, your lender will re-check your financial situation to confirm nothing significant has changed.

That means reconfirming details such as your credit report, income, employment, and debt-to-income ratio (DTI). Taking on new debt, like opening a credit card, can affect your interest rate or even your loan approval. If something changes with your job or income, tell your loan officer right away.

Red flags on bank statements for mortgage loans

Lenders also use bank statements for mortgage applications to see how you manage money. They’re not just looking at your balance. They’re watching for patterns that could trigger higher interest rates, delay the loan process, or lower the loan amount you’re approved to borrow. Here are the three red flags mortgage providers do not want to see.

1. Overdrafts

If your bank statements show multiple overdrafts, bounced checks, or NSF (non-sufficient funds) charges, lenders may decide you’re not managing your money well. Mortgage rule-making agency Freddie Mac requires additional scrutiny when these fees appear. And FHA loans take it further: even if an automated system approves you, a human underwriter must manually re-approve your mortgage application if NSF fees show up.

2. Large, undocumented deposits

Large or irregular deposits can raise red flags during the mortgage process. Lenders might worry that your down payment, cash reserves, or closing costs are coming from an unacceptable source. You can’t use money from someone who stands to gain from the sale, like the seller or your real estate agent. That’s considered an illegal gift.

So, what do mortgage lenders view as a large deposit?

• Fannie Mae’s Selling Guide says, “When bank statements (typically covering the most recent two months) are used, the lender must evaluate large deposits, defined as a single deposit that exceeds 50% of the total monthly qualifying income for the loan.”
• Likewise, Freddie Mac lists “recent large deposits without acceptable explanation” as red flags.

You can use money from outside sources for your down payment, but you’ll need to show where it came from. If it’s a gift, your lender will likely ask for a “gift letter” confirming it’s not a loan. You can also use funds from a down payment assistance program.

If you can’t show that a large deposit meets the home loan program’s rules, your lender won’t accept it. In that case, waiting 60 days before applying may allow the funds to count as your own.

3. Regular payments, irregular activities

Recurring payments can raise questions. If your bank statements show regular withdrawals that don’t correspond with any credit accounts listed on your mortgage application, that could indicate undisclosed debt. Credit reports typically include information on credit cards, car loans, and student debt. However, not every lender reports to credit bureaus, such as Equifax or Experian.

For instance, if you got a loan from an individual instead of a financial institution, those debt details may not appear on your credit report. However, the monthly withdrawal on your bank statement will likely alert the lender of a non-disclosed credit account.

Can a verification of deposit replace bank statements?

Verification of deposit (VOD) is a form some lenders use in place of bank statements for mortgage applications. After you sign an authorization, your bank completes the form to confirm account ownership and current balance.

Some borrowers attempt to use VODs to avoid issues on their statements. However, lenders can still request bank statements if anything appears suspicious. VODs also show the average account balance, which can reveal large recent deposits. If your balance suddenly jumps from $2,000 to $10,000, the lender will likely take notice.

Banks often include additional notes, such as overdrafts or non-sufficient funds. A VOD won’t hide that. Review your statements carefully and be honest; any suspicious activity may delay your loan application process.

FAQs about mortgage bank statements

Do you qualify for a mortgage loan?

Bank statements are just one of many factors lenders look at when you apply for a mortgage. Almost all areas of your personal finances will be under the microscope, including your credit score, existing debts, and any source of income you’ll use to qualify for the loan. These factors help determine how much house you can afford, the loan amount, and interest rate.

Ready to buy a new home or refinance your current one? Use the links below to explore your options and take the next step.