Savings and Assets for Mortgage Loans
Posted May 14, 2008
Documenting Assets is Important
Mortgage lenders have tightened up on underwriting criteria since the subprime fallout. One area that is increasingly looked at is the documentation of assets.
Asstes play a key role in qualifying for a mortgage loan. In many cases having assets may help a home buyer get approved when job time or income is less than desired. And while horrible credit is hard to overcome, tremendous assets can also help overcome some credit chellenges.
Assets can be used for paying towards money down or closing costs on your mortgage. They can also be used to provide mortgage “reserves.” Reserves of cash make a lender feel more comfortable should you run into a tight spot financially. With a reserve cushion, you would still have funds to make your mortgage payment, possibly for a few months!
Assets must be “liquid”. In other words, you must have access to get your hands on the funds. Certain retirement plans (like pension plans) do not allow any withdrawls at all, and therefore can not be considered assets. Other property owned, regardless of the amount of equity available, would not be considered assets. (Until you sell the property there is no guarantee as to how much money you would have, and taking a loan out against the property creates another liability.)
So for a mortgage application, acceptable assets would be items like savings accounts, checking accounts, money market accounts, stock shares, 401k and IRA accounts… any account that can be easily liquidated. For certain accounts such as 401k and IRA accounts, you may need to document the terms in which you can get the funds as well as the funds available.
Do you have money spread accross 4 different accounts? You may be tempted to consolidate them all to one account to make things “easier”… don’t do it! Leave the money in the accounts as they are. Any time accounts are opened, closed or money is transferred, it can become a headache having to not only document the accounts but also the source of all the deposits, withdrawls and transfers.
You may ask, why does this all matter? After all, it’s your money, right? It may well be your money, but from an underwriter’s viewpoint they need to be sure there are no unusual deposits that can not be documented. Their fear is that a borrower may have gone out and borrowed the $5,000 deposit that can not be documented creating another monthly payment not showing on credit yet.
So when you are applying for a mortgage loan in Charlotte (or anywhere!) be sure to provide every source of money you have saved. But don’t try to consolidate them into one particular account. It is easier for a processor to verify 5 accounts than to try and document 5 accounts plus 15 deposits and withdrawls.
This website provides information on FHA and VA loans, in addition to the hundreds of other conventional and jumbo mortgage loans available. As a mortgage loan officer, Ed has proudly served home owners and home buyers in the Charlotte area (including Concord, Gastonia, Matthews, Monroe, Huntersville and Ft. Mill as well as all of North and South Carolina.)
Apply online for your Charlotte area mortgage loan
or call 704-651-8704 for your free mortgage consultation.
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