Your loan officer will provide you a list of documentation you might need when you submit a loan application. Sometimes this list is given prior to an application while other loan officers provide a list of needed paperwork after the application has been submitted. Either way, just be prepared to provide what is asked for and move on. 

After review of your initial paperwork, sometimes the lender gets back to you with a few more new questions. Most often these new requests have nothing to do with getting your loan approved but more to do with simple documentation compliance. Sometimes borrow start to freak out a little bit when new questions come up because they think something’s wrong. This is rarely the case. Just a matter of dotting a few ‘i’s and ‘t’s.

Besides your credit and income verification, lenders also want to see your bank statements. At least statements from an account you’re using to close on the deal. It’s obvious to most that bank statements are needed in order to verify you have enough cash to close on your purchase. That's pretty easy. But there are other things lenders look for when reviewing bank statements.

One thing lenders do  with your bank statements is to third-party validate your income. For instance, if you get paid on the 1st and 15th, lenders want to see deposits that match up to what it says on your paycheck stubs.

Okay, fair enough. But what if there are other deposits not matching up? If those funds are needed to close, you’ll be asked to source those funds. If they’re not needed to close, you can choose to tell your lender to ignore them. But a lender won’t ignore something a little more substantial that shows up.

For instance, you get paid on the 1st and 15th. But a new deposit of $1,000 shows up. The lender wants to know where this came from. Why? Well, it’s possible that extra grand is actually a loan that will need to be paid back at some point. This directly affects your debt to income ratios.

If however the funds are a financial gift from a qualified source, you’ll likely need a ‘gift letter’ from the donor stating how much the gift was for and the money is not expected to be paid back. Lenders can have different internal guidelines, but in general this is what happens.

Knowing these things ahead of time can prepare you for these potential new questions to ensure a smooth, seamless closing.