Lenders dissect the entire credit history of a potential client with strict attention to income, credit, collateral and assets. Of the four, assets are perhaps the least discussed, yet may be the most important in securing credit and buying a home.
Assets include the amount of money needed for the down payment plus closing costs, pre-paid costs (e.g., insurance and taxes, escrow fees and funds that would be available in case of an emergency).
Assets could be considered a reflection of a one’s fiscal strength. Savings and budgeting could be a significant factor in assessing paying habits.
What are assets? Common considerations for a loan include stocks, bonds, mutual funds, 401Ks, retirement accounts, life insurance, cars, boats, antiques, jewelry and other real estate.
The source and timing of assets is also critical as restrictions have tightened. When borrowers are paying off credit cards to get their ratios in line, lenders want to know where the money came from. If it can’t be determined when a direct deposit is made from your employer or a transfer from one account to the next, a letter of explanation and a showing of proof of where it came from is likely to be required. It may not be advisable to make cash deposits or take any monies from someone personally unless it is a gift from a relative.
Large and recent savings deposits raise underwriter concerns as they can indicate loans that have yet to appear on borrowers’ credit reports. Borrowing from relatives to boost savings and credit worthiness also doesn’t help. If funds aren’t reflected on income statements and tax returns, they can’t be used to qualify for mortgages.
Make sure your assets are in order with proper documentation. Your preparation can speed you on the road to homeownership.
