Getting approved for a mortgage is a key element of your homebuying journey. It dictates whether you can buy a home and how much of one you can afford.
When you apply for a mortgage, you’ll need to share your entire financial picture with your loan officer. This includes your credit score, income and assets. Your credit score and income give you credibility in being able to manage debt and make on-time payments. However, you assets are just as important in the decision.
What Assets Do Lenders Review in the Mortgage Approval Process?
There are several types of assets that factor into a consumer’s financial picture.
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Stocks, bonds, and mutual funds
Your stock portfolio will be viewed as an important asset during your homebuying process.
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Bank investments
Savings accounts, checking accounts, certificates of deposit (CDs), and money-market accounts are also considered personal assets that will weigh into your mortgage approval decision.
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Retirement accounts
IRAs, 401(k)s and other retirement accounts are counted as personal assets.
Note: Dividends and interest are viewed as monthly income, not assets.
Why Do Assets Matter in Homebuying?
Lenders want to avoid making loans to people who won’t pay them back. The mortgage qualification process helps lenders reduce the risk of lending to parties who can’t afford the mortgage.
Consumers who have significant assets are considered less of a lending risk than those with few or no assets. That’s why they’re weighed so heavily when lenders are deciding who to qualify for a mortgage loan.
What Is an Asset Statement?
An asset statement is part of the mortgage application. The borrower is typically required to supply two months’ worth of statements for any asset they’re claiming. Asset statements help lenders:
- Verify the source of the funds. The lender will want to identify the source of your assets. For example, your paycheck could be listed as the source. If the source isn’t identified, underwriting will most likely contact you for additional information.
- Document that you have the down payment and closing costs necessary to purchase the house.
- Prove that you can manage money well. The entire mortgage qualification process is set up to identify positive and negative financial behaviors. If you’ve accumulated assets, it’s a plus.
Remember that no single piece of information in your financial picture will get you approved for a mortgage loan. There are several requirements that must all be present for lenders to view you as credit-worthy.
When you’re planning to buy a home, it’s a wise idea to get your assets in order. Being able to count them in your mortgage application makes you look more attractive to lenders and increases your likelihood of being approved. Once you are, you’re one big step closer to landing the house of your dreams.
Have your assets in order? Contact MIG to apply for your mortgage loan today.
