How Do Mortgage Underwriters View Assets For Down Payment

In this article, we will cover and discuss how do mortgage underwriters view assets for down payment on home purchases. Borrowers must have sufficient cash to cover the required minimum down payment on their home purchase. Dale Elenteny, a senior mortgage loan originator at Gustan Cho Associates says the following about how do mortgage underwriters view assets for down payment on a home purchase:

How Do Mortgage Underwriters View Assets? All assets used for the down payment and closing costs need to be verified assets.

All mortgage loan programs require down payment and closing costs. However, VA loans and USDA loans do not require down payment. VA and USDA loans offer 100% financing. How do mortgage underwriters view assets for the down payment on a home purchase? Lenders want to see that down payment comes from borrowers’ own or gifted funds and those funds need to be sourced.

How Do Mortgage Underwriters View Assets: Gift Funds for the Down Payment

Gifted funds for a down payment are allowed. However, a gift letter needs to be completed and signed by donor stating that gift funds is not a loan and does not have to be paid back. The seller, any entity that may financially benefit from the transaction or any person who is reimbursed by a prohibited source may not provide funds for the required minimum down payment. However, under certain conditions, the minimum down payment may be provided by a Government Entity

How Do Mortgage Underwriters View Assets: Documenting Assets

All assets that are going to be used for the down payment and closing costs on home purchase needs to be documented. Asset information listed on the 1003 mortgage loan application will be used to render a decision by Automated Underwriting System (AUS). However, loan officer needs to be sure that the assets listed on the 1003 and entered into AUS are qualified verified assets or the AUS Findings will be null and void. Written Verification Of Deposit (VOD) will be requested by mortgage processor so funds will be listed as verified funds.

How Do Mortgage Underwriters View Assets: Cash Reserves

Cash Reserves are normally not required by borrowers who have decent credit scores and lower debt to income ratios. However, there are times where the Automated Underwriting System (AUS) may ask for cash reserves by borrowers. Cash Reserves, again like any other asset information, needs to be verified and documented in order for it to count. Here are cases where cash reserves may be required:

• 2 to 4 unit properties
• 3 to 4 unit properties requires 3 months PITI in reserves
• Investment home loans
• Credit scores under 620
• High debt to income ratio borrowers
• Excessive outstanding collections and/or charge off accounts
• No credit tradelines on credit report

The Automated Underwriting System may request 2 months of cash reserves. Gift funds cannot be used as cash reserves and need to be borrowers own funds.

How Do Mortgage Underwriters View Assets: Seasoned Funds

If borrowers have undocumented cash, that cash cannot be used unless the following:

• Been deposited in a bank account and seasoned for 60 days
• If cash was from the sale of high ticket items such as auto, boat, jewelry, then a bill of sale and copy of check and deposit slip
• All cash needs to be documented If regular smaller deposits were made in bank accounts, it needs to be determined that the accumulation of cash is reasonable
• It needs to be based on the time period during which the funds were saved

The mortgage applicants income stream, spending patterns, documented monthly expenses, and the history of borrowers use of financial institutions is also evaluated.

Licensed Real Estate Agent’s Commissions As Verified Funds

If the home buyer is a licensed realtor and is receiving a commission from the sale of the property that they are buying, that commission is considered verified funds and can be used for down payment and/or closing costs on the real estate transaction.

How Do Mortgage Underwriters View Assets: Earnest Money Deposit

Earnest Money Deposit is considered verified funds and is deducted from cash to close on real estate transactions. However, the source of the earnest money needs to be verified by providing 30 days of bank statements. The earnest money needs to be cleared of the borrower’s bank account.

How Do Mortgage Underwriters View Assets: Documenting Assets

Gift Funds can be used as verified funds for down payment and closing costs. However, lenders and the Automated Underwriting System does not view gift funds favorably. Gift Funds Are Allowed By The Following:

• Family Member and/or relative
• Parent
• Grandparent
• Spouse
• Children which includes son, daughter, stepson, stepdaughter, legally adopted children, foster children, or other persons related to a borrower by blood, marriage, adoption, legal guardianship, domestic partnership, fiance, and/or fiancee
• Borrowers credit union
• Borrowers employer
• Charitable group
• Governmental agency for Down Payment Assistance

Prohibited Gift Funds

The following cannot provide gift funds to home buyers:

• Sellers
• Realtors
• Home Builder
• Associated Entity
• Cash Gifts not acceptable

How Do Mortgage Underwriters View Assets for Down Payment

Find out how underwriters evaluate your down-payment assets, which funds are acceptable, what could raise questions, and how to get your finances mortgage-ready.

How Underwriters Check Your Assets

When you apply for a mortgage, lenders look at more than your income and credit score. Underwriters dig into your assets to confirm the down payment is genuine, sufficient, and properly documented. Their goal is to limit risk and make sure you can safely close on the home.

What Assets Do Underwriters Review?

Acceptable Funds for the Down Payment

Underwriters need proof that the down payment comes from sound and stable sources. Funds that generally pass muster are:

• Checking and savings accounts: Standard and easy to document.
• Retirement accounts: Funds from a 401(k) or IRA can count, but you’ll need proof that you can access the money.
• Investment accounts: Stocks, bonds, and mutual funds work, as long as recent statements show your name on them.
• Gift funds from family: You can use these in most mortgage programs if you provide a gift letter and prove the money transferred.
• Sale proceeds: Money from selling your house, a car, or another piece of property works too, as long as you document your ownership and the transaction itself.

Sources of Funds We Cannot Accept

Some sources could trigger denials or delays. These include:

• Cash deposits without proof.
• Personal loans are not listed on the application.
• Gifts from friends or others, not family.
• Unless the program allows them.
• Unverified or illegal earnings.

What Lenders Will Review

Account Statements and Verification

Most lenders will ask for bank statements from the last two to three months. Underwriters will check:

• The current balance confirms you have enough for your down payment and required reserves.
• Any big or unusual deposits, which you must explain and document.
• The names on the statements should match the borrower’s name.

Paperwork for Gifts and Sales

You must have a gift letter for gift money that states the funds don’t have to be paid back. If they come from a sale, you need:

• Documentation showing you owned the item before the sale.
• A sales contract or receipt.
• A bank statement showing the funds were deposited into your account.

How Underwriters Evaluate Asset Stability

Seasoned Funds

Underwriters look for “seasoned” money—cash in your bank for at least 60 days. Money that has aged 60 days feels more stable. This keeps them from second-guessing whether the deposit came from a loan, a gift, or a temporary boost that could vanish.

Reserve Requirements

Many loan programs want to see that you’ll have extra cash left over after your mortgage closes. This backup cash is called “reserves” and usually equals one to six months of your estimated payment. The underwriter will scan your statements to find that safety cushion.

Common Red Flags in Asset Reviews

• Large cash deposits without receipts or explanation.
• Sudden account-to-account transfers that don’t match your usual pattern.
• Last-minute borrowing that shows up just before closing.
• Different names or nicknames show up on account statements.
• Using business funds as a personal gift for your down payment without proper loan approval.
• Any of these flags can slow down or stop your mortgage approval.

How to Prepare Your Assets for Underwriting

• Keep cash steady in the same account for 60 days before you fill out the mortgage application.
• Hold off on big cash deposits unless you can prove where the money came from.
• Stash extra cash for reserves that go beyond your down payment.
• Talk to your loan officer early to sort through the right accounts.
• File receipts and statements for any gifts, transfers, or extra deposits.

Taking these steps in advance keeps the underwriter from second-guessing your money and can help you get a quicker “yes.”

Wrapping Up: What Underwriters Really Think When They See Your Assets

Remember, underwriters aren’t out to sabotage your dream of homeownership. They want proof that your down payment and extra savings are real, stable, and untroubled. When you know what they need, you’ll breeze through the review.

FAQ: What Underwriters Want to See About Your Down-Payment Assets

Why Does The Underwriter Care Where My Down Payment Came From?

They must confirm that the money is legal, dependable, and not borrowed, so your budget remains strong.

How Many Months of Bank Statements Do They Review?

Expect them to ask for the past two to three months of statements.

Can I Count Gift Money Toward My Down Payment?

Absolutely. Just provide a gift letter from an eligible donor, typically a family member.

What If I Made a Big Cash Deposit Before My Application?

You’ll need to trace its origin. If you can’t document the source, that money may get removed from the equation.

Do Retirement Accounts Count As Assets For a Down Payment?

Yes, but you need to prove you can get to that money without paying a penalty. If you’re pulling money from a 401(k) or similar account, you often need to show a signed loan document from your plan.

Can I Use Business Funds For My Personal Home Purchase?

Normally, no. If you want to use money from the business account, the lender usually needs to see a clear paper trail and must tick its box of approval.

How Do Underwriters View Borrowed Funds?

Usually, borrowed funds can’t be part of your down payment. Some programs permit a secured loan, like a 401(k) loan, if you disclose it upfront.

What Are Seasoned Funds?

These deposits have stayed in your account for at least 60 days. Lenders want to see that money coming in regularly, so seasoned funds suggest stability.

Will Underwriters Call My Bank To Verify Funds?

They could. They may use a Verification of Deposit (VOD) form that your bank fills out, or check the bank statements you upload.

What Should I Do if My Funds Are Spread Across Multiple Accounts?

Move the extra cash to one or two accounts and document each transfer with screenshots or bank slips. This will reduce confusion for the underwriter and save time.

Homebuyers who have any questions on this topic please contact us at Gustan Cho Associates at 1-800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays.