Why Your Checking Account May Be Vital To Purchasing Your First Home 

Many first time home buyers have limited credit or, in some cases, weak credit.  In those situations, the investors are looking for any way they can to qualify the buyer.  The underwriters are trying hard to justify why a first time home buyer should be approved. 

The manner in which the home buy has handled their account is one of the factors that some underwriters, especially FHA underwriters, consider.  It is a negative if there are numerous overdrafts.  The underwriter may also look at the debits (outgoes) to the checking account to see if the home buyer has any unreported obligations like a garnishment or child support. 

Underwriters frequently perform verifications of the home buyer's rental history.  Many investors will not accept a verification of rent (VOR) from a private party.  That is, they will only accept a VOR from a property management company or a large apartment complex.  If the home buyer is renting a single family house from an individual, then the VOR is useless.  In those situations, the investor will ask for copies of the homebuyers cancel checks for the past 12 months.  An alternative to cancelled checks is the homebuyer provides copies of the duplicate checks and the accompanying bank statements for the past 12 months. 

If cancel checks cannot be provide, many investors will decline the loan or at the very least, raise the interest rate.   

The reason behind these policies is that the past is the best predictor of the future.  If a potential homebuyer has made their rent payment on time, they are all the more likely to make their mortgage payment on time.