Do Mortgage Companies Consider Savings Accounts for Qualification?

Mortgage lenders consider several factors when determining who qualifies for a home loan. This includes the money in your savings account. The more dollars in your account, the better you look to a lender.

What Lenders Want

Mortgage lenders want to make loans to those borrowers who are most likely to pay back their money on time. The most likely candidates to do this are borrowers who are in strong financial health. Lenders prefer working with borrowers who have a steady income, a history of paying their bills on time, debts that don't eat up too much of their gross monthly income and ready access to savings.

The Importance of Savings

Mortgage lenders look at savings accounts as a type of safety net for borrowers. If you should lose your job or temporarily suffer a dip in your monthly income, you can use the dollars in your savings account to cover your mortgage payments. Because of this, lenders look at borrowers with sizable savings accounts as less risky.

Gifts

When you apply for a mortgage loan, you must provide documentation showing the source of any recent large deposits into your savings account. For instance, if a family member provided you a $5,000 gift to help cover the closing costs of a mortgage, you'll have to provide your lender with a canceled check documenting the transaction.

Why Savings Alone Aren't Enough

Even if you do have a substantial amount of money in your savings account, that might not be enough to qualify for a mortgage loan. Lenders rely on several criteria to determine who is worthy of their mortgage dollars. For instance, if you have a low three-digit credit score, a lender might not approve your loan application. That lender might fear that you'll miss mortgage payments because your low credit score shows that you already have. If you have high debts and a gross monthly income that isn't high enough, a lender might hesitate to give you a loan even if you have a large savings account. Your low income stream and high debts might cause you to dip into your savings account once you add the responsibility of a monthly mortgage payment. Before long, you might deplete those savings.

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About the Author

Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.

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