To calculate bank statements for a mortgage application, start by compiling all monthly bank statements for the past 12 months. Verify the ending balance for each statement and sum the cumulative cash reserves, excluding one-time deposits or transfers. Ensure consistency in account activity, such as regular deposits and payments, and confirm that the account has been open for at least three months. Lenders typically require a minimum of two months’ reserves, with stricter requirements for riskier borrowers.

This process ensures lenders assess a borrower’s ability to manage debt and cover potential mortgage payments. According to the Consumer Financial Protection Bureau (CFPB), 30% of mortgage applications are denied due to insufficient documentation or inconsistent cash flow. For example, Fannie Mae guidelines mandate that reserves must cover at least 6-12 months of payments for jumbo loans, while conforming loans may require 3-6 months. A 2022 study by the Urban Institute found that borrowers with 6+ months’ reserves had a 25% lower default risk compared to those with fewer reserves. Additionally, the Federal Housing Administration (FHA) requires reserves of 3-6 months for loans with down payments below 20%, as noted in their 2023 underwriting standards. Accurate bank statement analysis directly impacts loan approval rates and terms, with errors in documentation increasing denial probabilities by up to 40% (National Association of Realtors, 2023). Ensuring precise calculations mitigates risks for both borrowers and lenders while aligning with regulatory compliance.