How to Verify Your Assets for Closing When Getting a Mortgage

Verifying Your Assets for Mortgage
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Asset verification is the bane of loan officers, processors and mortgage underwriters everywhere. If they all hate it, as conditioned as they have become to the documentation burden of getting a mortgage, it must be bad. It can be painfully tedious for potential homebuyers too. So, why all the hand-wringing?

Because people are people and their money reflects that. People occasionally overdraft. People sometimes don’t know where that $287 cash deposit came from, exactly.

 Sometimes they know exactly where that $287 cash deposit came from, but prefer you not know. Even if not knowing means their loan approval is in jeopardy.

Asset Verification

Asset verification, for those who are not laden with assets, is invasive. If you have ample green, with a few extra hundred thousand left after your down payment, you will not get the same inquisition level other buyers may.

The first-time buyer, with barely enough money for a long trip to IKEA after they close, can expect a more formal inquiry than their future - more successful - versions can expect.

So do not blame your loan officer, they are just following guidelines. The easiest path, with the least amount of pain, is to comply. Here’s how you should do it.

What Does Underwriting Consider an Asset?

Assets are any source of funds that you have available to you. This can be money in any of the following: 

Problems With Cash

The assets you listed on your loan application must be verified and your mortgage planner must also verify you have enough money to cover your down payment and your closing costs.

Banks are required by law to verify all money that is in a bank account to be properly sourced.

This means that cash is bad! Lenders cannot work with un-sourced funds from a borrower.

Banks are required to verify any account by reviewing the 2 most recent statements for any accounts listed on the loan application. When reviewing the statements every deposit no matter how small must be verified as to the source of the deposit.

Cash deposits into an account that cannot be sourced cannot be used and can taint the whole account so that none of the money in that account can be used for the purchase of the home.

If your practice is to cash your paycheck, pay your bills with the cash, and deposit the leftover money into the bank, STOP! Deposit your check into your bank and take out only what cash you need so that you don’t have any cash deposits going into your bank account.

Non-sufficient Funds

When a lender is reviewing your bank statements, if there are charges for non-sufficient funds (NSF) or overdraft charges to cover ATM withdrawals or checks you wrote on the account, your loan could be denied.

A bank is not going to lend you money if you have numerous NSF fees or overdraft charges on your account. If you had one or two and it can be explained in a letter that is signed by the borrower that might be okay.

You can get a gift from a family member, employer, or close personal friend to help with down payment or closing costs. But this can only be done if the person giving the gift can provide proof they had the money in a bank account before they gave it.

The donor needs to provide a bank statement that shows the money and no large deposits. If there are large deposits in that account before the gift was given, those deposits must be sourced or the gift will not be allowed.

You are not allowed to receive cash gifts to help with down-payment or closing costs, unless they are verified and from an allowed source.

In addition to a bank statement from the donor showing the money to give, you will also need to provide proof the gift was 30 given which is a copy of the check and you must provide proof the gift has been deposited into your account.

The proof the gift has been deposited is simply a bank statement showing the deposit.