Gustan Cho The Mortgage Expert,
Publish On: July 6, 2020
This Article On How Mortgage Underwriters Consider Verified Assets For Home Loan
Homebuyers applying for a mortgage loan, lenders will need to see verified assets for home loan. Verified Assets are the following:
- checking accounts
- savings accounts
- IRA
- 401K
- Keogh
- investment accounts
All assets need to be sourced and verified in order for it to count. Cash is non-existent in the mortgage world. Cash is considered not verified funds.
- Lenders will require borrowers has verified assets for the down payment and closing costs of their purchase prior to a clear to close
- All loan programs have strict guidelines when it comes to verified assets
In this article, we will discuss and cover How Mortgage Underwriters Consider Assets.
Copies of Cashier’s Checks Or Canceled Checks On Earnest Money
Never pay earnest money with cash
- This is because cash does not count in the mortgage industry
- Pay it with a bank check or cashier’s check
- Make a copy of the check and/or cashier’s check
- This because that will be verified assets and need to provide that to the mortgage lender
- Also, 60 days of bank statements will be required by the mortgage lender
- Funds of the earnest money leaving bank account will need to be verified
Earnest money will be counted towards the down payment on a home purchase as long as it is verified.
Checking And Savings Accounts Are Verified Assets For Home Loan
Two months of bank statements will be required by the lender
- Every larger or irregular deposit will be reviewed
- Sourcing will be required to be counted as verified assets
- All pages of the bank statements and/or bank print outs will be required even if it is a blank page
- Reason for this is because bank statements have page of 1 of 7, page 2 of 7, page 3 of 7, page 4 of 7, page 5 of 7, page 6 of 7, page 7 of 7
If one of those pages is blank, lenders will need to account for all pages.
Irregular And Large Deposits
All large and irregular deposits need to be sourced in order to be counted.
- For example, wage earners with regular paycheck deposits direct deposited to checking account, a mortgage underwriter will see that
- It will state that the paycheck deposit is from employer
- That is considered sourced deposits
- However, if bank account holder gets a $5,000 deposit that is irregular, underwriters will question where that came from
- If it has no paper trail and it is a cash deposit from a gift from a relative, then it cannot be counted as verified assets for a home loan
If the $5,000 deposit can be documented, it can be used.
Need Papertrail And Documentation For Large And Irregular Deposits
Acceptable documentation to use the $5,000 deposit as verified funds can be the following paper trail:
- sale of a car
- need to show the copy of the check
- copy of the bill of sale
- copy of title
- deposit slip
- If borrowers can provide the above documentation from the sale of the vehicle, it is considered verified assets for a home loan
The $5,000 can be used as sourced funds and can be counted for the down payment and/or closing costs on the home purchase.
Retirement Accounts Are Verified Assets For Home Loan
IRA, 401k, and Keogh Accounts are all verified assets for home loan purposes.
- 60% of the account value on IRA, Keogh, and 401k accounts can be used as verified assets for a home loan
- The other 40% can be used for reserves if the underwriter requires reserves
- Reserves cannot be gifted and need to be actual funds of borrowers
- 3 to 4 unit properties require 3 months reserves of principal, interest, taxes, and insurance also referred to as PITI
- Copies of the retirement plan are required, especially the withdrawal agreements
If borrowing from IRA, 401k, or Keogh Accounts, the monthly payments to repay those accounts will not be counted towards the calculation of debt to income ratios. This is since it is viewed as borrowing against yourself.
Gift Funds Can Be Used As Verified Assets for Home Loan
Gift funds from a relative can be used as verified assets for home loan for the down payment and closing costs purposes only. Gift Funds cannot be used for reserves or to pay off existing consumer debts.
Real Estate Agent As Home Buyers
If you are a real estate agent and are purchasing a home, you can use your real estate commissions towards your down payment as verified assets for home loan.
