Bank Statements...

[KeithW]

Why does the lender ask for bank statements? What are they looking for?

I only ask because my bank account has more work related transactions, than personal ones, as I deal a lot in cash.

[ShanetheMortgageMan]

They need bank statements if the funds you need to qualify (down payment, closing costs or reserves) will directly or indirectly come from that account.  We need to verify you have the funds, and the funds won't be coming from an ineligible source.  Cash deposits almost always create an issue.  If you are prepping yourself to qualify I'd avoid depositing any cash (other than very small amounts), since it's virtually untraceable so the source could be anything (including an ineligible source).  So a lender will just back out the cash deposits from the available amount of funds you'd have to qualify with.

What I normally recommend for people who deposit cash is instead of depositing the cash, you use it to pay your bills instead of the money in your bank account.  Paying for groceries?  Gas?  Clothes?  Utility bills?  Use cash whenever possible.  That way you will still be able to pay for the expenses you normally have, and you won't deplete the balance in your checking/savings to do so.  Is it annoying?  A little bit, yes, but not as annoying as finding out you can't use a lot of the money in your checking/savings accounts.

If you are self-employed, then I recommend you keep separate bank accounts for your business & personal.  That way you can deposit the employment related income in your business account, and transfer it over to your personal account.  Cash deposits into a business account are more acceptable than into personal.

[KeithW]

Thank you.

[elizabeth16]

I worry about this. My roommate and I split bills and rent, and every month they owe me a large amount that gets cash deposited. We may have to work something out for the next few months to avoid that

[DrZoidberg]

As said before it's to verify you're not beeing gifted the down payment or coming from ineligble sources. Although the mortgage is solely in my wife's name we share our account and I get travel reimbursements every week from work since I put it on my personal cards. They are usually $2000-$2500 per week. I had to show every expense receipt for 2 months worth just to verify and get them to accept it. It's something I can't stop from happening so I had to submit my 30 pages of expense reports lol. 

[ShanetheMortgageMan]

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@elizabeth16 wrote:
I worry about this. My roommate and I split bills and rent, and every month they owe me a large amount that gets cash deposited. We may have to work something out for the next few months to avoid that

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Get a check instead of cash.