Planning to apply for a home loan? But wonder why the lender like Bank/financial institution asks for your bank statement before offering a look at any other document such as income proof or a salary slip? If yes, then you have landed on the right blog post as this article helps you and many other aspiring home buyers to know about the reasons why your bank statement is the first thing any bank/financial institution look at before proceeding the home loan application. Here we are listing factors that a home loan lender examines via your bank statement:
- To Verify Address of the Loan Borrower
The maximum applicants are genuine but there are some brats who won’t hesitate from a foul play with a bank/financial institution in order to collect Lumpsum or handsome money. Thus, the fraudsters produce forge documents in order to showcase them as an honest applicant. But, the one thing that assures the applicant’s honesty is the address proof. Hence, the loan lending authority verifies the present and permanent address through the bank statement. The home loan applicant is required to produce bank statements for the period of a minimum six months and maximum of one-year.
- To Cross Check Existence of an Ongoing Loan
The bank statement allows the lender to check if the applicant is paying for any ongoing loan amount or not. The deduction/debit of a specific amount from the account every month indicates that the applicant is paying EMI [Equated Monthly Installments] in return for buying something. Well, paying off an EMI is not a big thing in today’s time, but the monthly deduction of a handsome amount on a monthly basis can raise the eyebrow of the lender. Also, a person is not eligible for a home loan if he/she is availing the same from any other bank or financial institution at the same time.
- To Assess the Financial Condition
Here the bank/financial institution consider things differently for two main categories of people. The first category is of the salaried people who get remuneration on a monthly basis. In this case, the borrower first showcases his/her Income Tax return where his/her annual income is declared along with income proof. This IT return is compared with the bank statement to calculate if the applicant is genuinely earning the declared amount or have forged the documents. That’s not all, as the bank/financial institution check if the same salary amount is credited into the person’s bank account every month or there is non-uniformity in the case. If all goes well, then the lender proceeds with further steps else cancel the loan application.
The second category is of businessmen, who earn money on daily basis and have yearly turnover. The billing receipts, income and expenditure along with Profit and loss are some of the things that a lender checks while comparing the bank statement with other documents. The bank/financial institution gives approval for further proceeding related to the sanction of home loan if the authority finds the bank statement satisfactory. Else, the loan lending authority declines sanction of loan.
- Inward/Outward Cheques Return
Another reason to ask for the bank statement is to check if there is any issue related to cheques bounce or return. Both these scenarios give an overview of the applicant’s financial condition as the bank statement have details like previous account balance, how much amount is debited/credited and other charges such as the penalty for keeping insufficient balance and more.
- Account balance Reflects Your Financial Condition
The continuous billing cycle says everything about your financial condition. The regular payments or delay in payment grab the attention of home loan lender and thus gives him a clue that things are not going well for you or whatever the other case is. Also, the frequent payment of hefty amount can also spoil the deal for you.
The sudden increase in the use of credit card can also play a spoilsport when it comes to availing a home loan as these transactions are clearly mentioned in the bank statements. So, use money wisely.