Buying Home | Buyer Don'ts | Buying Zero Down | Are You Pre-Approved? | Debt to Income Ratios | Documenting Assets | Your Down Payment | Fixed Versus Adjustable | 401(k) for a Down Payment | How to Get a Loan Quicker | Gifts for a Down Payment | FHA Loans | VA Loans | Affordability | Loan App Checklist | When to get Qualified | Getting an Appraisal | Buyer Mistakes | Money Saving Ideas

Documenting Assets Is a Must

A standard requirement in the mortgage application process is to verify the sources of your down payment, closing costs and assets for reserves after closing. Reserves are funds left over after all of your other expenses in the transaction have been paid. The lender will consider reserves as a rainy day fund that you have available should you need it. The lender will require it’s underwriter to verify funds to help determine the funds’ source, and a home buyer who does not have access to liquid funds after closing is considered a higher financial risk.

Documenting that the down payment comes from your savings and that you will have savings or assets over and above the down payment gives the lender confidence in your strength as a borrower and your ability to repay the loan if your financial situation takes a sudden turn for the worse.

A paper trail must be established to document the source of all funds used in the transaction. Take extra care to document where your funds for the down payment or closing costs come from. Failure to adequately authenticate where your funds originate will usually mean denial of your loan. For example, funds that suddenly appear in one of your accounts without explanation is unacceptable.

Acceptable Down Payment & Closing Costs Sources

• Cash in a bank or money market account
• Mutual funds, stocks, bonds, IRA, 401(k), life insurance cash value
• Proceeds from the sale of another property
• Gift from an immediate relative
• Loan on secured assets
• Sale of assets

Name That Value