When you’re applying for a mortgage, especially an FHA loan backed by HUD, the financial scrutiny can feel intense. You might be asked to provide bank statements from the last two months, and a common question that pops up is what happens to old accounts. If you’ve recently closed a checking or savings account, you might be wondering if that will raise a red flag during the underwriting process.
The short answer is that HUD doesn’t typically go on a fishing expedition for closed accounts. Their primary focus is on the accounts you list on your application and the statements you provide. However, the story doesn’t always end there, and it’s important to know when a closed account might come into the picture.
When a Closed Account Might Be Reviewed
While HUD’s standard procedure is to verify the assets you currently have, there are a few scenarios where a closed account becomes relevant. The most common reason is if there was a large, unusual deposit in your active account that needs to be sourced. For instance, if you received a gift from a family member, the underwriter might ask for a gift letter and proof that the funds came from the donor’s account. If that money was temporarily held in an account you’ve since closed, you may need to provide a statement from that closed account to show the transaction trail.
The Importance of a Clear Paper Trail
Mortgage underwriting is all about creating a clear and verifiable financial story. Lenders need to ensure that your funds are seasoned, meaning they’ve been in your possession for a reasonable time and aren’t a hidden loan. If you’ve consolidated your finances by moving money from an old account to a new one right before applying, it’s a good idea to be prepared. You might need to provide a final statement from the closed account to show where the large deposit originated, proving it was your money all along.
Being Proactive with Your Lender
Transparency is your greatest ally. If you know your bank statements show a large transfer from a recently closed account, mention it to your loan officer upfront. They can advise you on whether you’ll need to dig up that old statement. Having it ready can prevent delays later in the process. It’s much easier to explain a simple account consolidation than to have an underwriter discover an unexplained financial move.
In most straightforward cases, a closed bank account won’t be part of your HUD verification. The process is designed to assess your current financial stability. By understanding when and why a closed account might be needed, you can gather your documents with confidence and help ensure a smooth path to loan approval.
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