November 17, 2019

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FHA Loan Reader Questions: Bank Statements

109A reader asks, “Is a bank statement, showing the amount needed at closing, required with my application? What is a lender required to ask me for?”

In some cases the FHA gives the lender the option of collecting a bank statement, and in others the bank statement is FHA-required. Lender standards may insist on bank statements, so what the FHA allows and what the lender requires may differ; the FHA may not require a bank statement in some cases, but the lender is free to.

We can find evidence of this in HUD 4155.1 Chapter Five Section B under the heading, “Cash and Savings/Checking Accounts as Acceptable Sources of Funds” states:

The lender must verify and document the deposit amount and source of funds, if the amount of the earnest money deposit

• exceeds 2% of the sales price, or
• appears excessive based on the borrower’s history of accumulating savings.

Satisfactory documentation includes

• a copy of the borrower’s cancelled check
• certification from the deposit-holder acknowledging receipt of funds, or • separate evidence of the source of funds.

Separate evidence includes a verification of deposit (VOD) or bank statement showing that the average balance was sufficient to cover the amount of the earnest money deposit at the time of the deposit.”

Furthermore, Chapter Five states, “A VOD, along with the most recent bank statement, may be used to verify savings and checking accounts.
If there is a large increase in an account, or the account was recently opened, the lender must obtain from the borrower a credible explanation and documentation of the source of the funds.”

But not all circumstances are covered by this rule–what about the borrower who has money saved at home? According to HUD 4155.1:

“Borrowers who have saved cash at home, and are able to adequately demonstrate the ability to do so, are permitted to have this money included as an acceptable source of funds to close the mortgage. To include cash saved at home when assessing the borrower’s cash assets, the

• money must be verified, whether deposited in a financial institution, or held by the escrow/title company, and
• borrower must provide satisfactory evidence of the ability to accumulate such savings.”

Again, lender standards may insist on a bank statement for a wide variety of situations so even when the FHA does not specifically require a bank statement, the lender might.

Do you have questions about FHA home loans? Ask us in the comments section.

Joe Wallace - Staff Writer

By Joe Wallace

September 10, 2014

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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