What Constitutes Buyer Assets in the Mortgage Process?
Prepared by Barbara Sim, Mortgage Loan Originator NMLS #755989, Inlanta Mortgage
What can be used as an asset in the mortgage process? It’s not as simple as it seems. Take the cash-challenged buyer who is looking to buy a home, and believes that, while he or she has little cash to put down, there are plenty of other assets available to be used, including employer retirement plans, cars, motorcycles, and even jewelry. What that buyer may not realize is that with the possible exception of an employer retirement plan (which may be accessed to purchase a home), the items listed above cannot be used for a down payment. Whatever they’re worth, they aren’t seen as legitimate assets by lenders.
Selling an asset
So, what if the buyer sells an asset to use toward the down payment? Also, not easily done. The proceeds of the sale would need to be in a bank account, and the lender would require some type of paper trail, such as a copy of the bank deposit and a copy of the bill of sale.
Finally, for the buyer who intends to put a cash gift toward the down payment, there are limits on where the gift can come from, and sometimes, how much it can be. The best assets are both liquid (easily accessible) and in a bank account or retirement plan for a considerable time. So, do your clients a favor; refer them to your lender partner for more information on what actually constitutes an asset in the mortgage process.