Cash Assets & Your New Home

In applying for a loan, assets are an important contributing factor. Lenders want to see that you have enough cash assets in order to make the loan workable. Some base the amount of assets they require off of your income, some just base them on the months in reserves for the loan they are looking to give you. Most would like to see at least 2 months in reserves. This means if your new proposed mortgage payment is going to be $1200, they want to see that you have at least $2400 in the bank.

When you are applying for a stated income loan, which are few and far between these days, lenders can require you to have at least 3 times your monthly income in the bank for reserves. This is not as common, but not unheard of either.

Your broker will ask you to provide 2 months bank statements which consists of 60 days assets. They will need all pages of these bank statements which are required by the lenders. If you have more than one bank account that you want to use for either down payment, reserves or closing cost you will need to provide those statements as well. If it is a 401-k or IRA quarterly statement they will only ask you for the last statement you received. Lenders only consider 60-70% of the money in a retirement account depending on which type of loan you are getting.

If you are purchasing a home you will be required to provide assets showing you have enough money for the down payment (3-20%) or more if you have it. You will also need enough for your closing cost and reserves. On refinances, you normally only need the closing cost and reserves.

Closing Cost
The “closing” or the “close of escrow” is the last stage in the transfer of title of real property from one person to another. Closing cost are fees that are charged by the broker, lender, attorney and third party vendors such as the credit agencies, a courier service and an appraiser of the property. These non- reoccurring fees associated with closing do not include all costs needed to complete the transaction. Closing costs do not include down payment, real estate taxes, insurance fees, and several other expenses.

If you have large deposits showing on your bank statements which are not income related the lender will require an explanation of the deposit. They want to know that the money put into your account is your money and not a gift from someone else. Certain types of loans allow gifts. Gifts are usually ok as long as it comes from a family member. They will ask you to provide documentation for the gift such as: a gift letter signed by all parties, a copy of the gift check and the donor’s ability to give the gift. If the money is not a gift, you will need to provide a paper trail of where it came from. For instance, if you sold a car and received a lump sum of money you will need to provide a “bill of sale” showing that amount.

An important thing to remember in applying for a loan is not to move money around. Keep your money where it is. Lenders like seasoning on assets. They want to see that the money has been in your account for at least 60 days. Save your money and do not make any large purchases right before or during a loan transaction.

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