• Selling Costs
• Making An Offer
• Realtors
• Buying Bank Owned
• Mortgages
• Buying Real Estate
• Sell Your Home
• Seller's Guide
• Selling Basics
• Selling A House

• FICO Scores
• Different Types Of Lenders
• Mortgage Money
• Mortgage Calculators
• Applying For A Mortgage
• Types Of Mortgages

Documenting Assets And Down Payment

When trying to secure a loan for financing your dream home you are going to have to come up with the money for the down payment. This, we all know.

While this can be hard enough in and of itself, you are also going to need to come up with some assurance that you are going to be able to pay for that loan over the next, 10, 15, 30 years. This is the tricky part.

There is one exception however; this is no asset verification loan. These are very hard to come by and are often reserved for special customers, or customers with special circumstances. So, unless you are special, you are going to need to prove that you have the assets to back up your mortgage.

The process of documenting your assets also goes beyond simply paying for your down payment. Your lender will want to know is you have additional funds beyond that (or reserve funds) that you can draw upon if you hit a rough patch in your financial life.

For instance, extra assets will help you if hold on to your mortgage if:

You are going through a divorce

A death in the family Unemployment Medical emergency Trouble with the law

Additional assets will also help you borrow more money in future to do things like home renovations and additions to your home.

Naturally this is all easier said that done, so your first step is to determine where exactly you stand financially to see where you will need to make improvements.

When you begin to assess your assets make sure that you keep detailed records of all funds that you use for your down payment, as you don't want there to be any confusion in the future.

Bank Accounts

This will be your first step in documenting your assets for your down payment. The quickest and easiest way to do this is to give your lender recent copies of your most recent bank statements. In most cases lenders will ask for at least two months worth of bank statements for all of your accounts. It is best if you provide three.

This includes:

Checking accounts Savings accounts Money market accounts

In some instances your potential lender will send a verification of deposits to your bank in order to confirm the legitimacy of your bank statements, but this is rare and only used in cases where you loan is in jeopardy.

If the money that you are using for your down payment has been in your bank account for the entire two months you are in good shape. These are known as seasoned funds and they are rock solid.

If you have any large deposits your lender may ask you where they came from to determine whether you padded your bank account just before the lender looked at your statement. So don't try and add to the appearance of your bank account by borrowing from your credit cards. We'll come to that later. Stocks and Bonds

If you have stocks or bonds, you undoubtedly get statements from your brokerage house. These also have to be provided to your lender. Again they should date back to the previous two months, and should have no unusual purchases or sales.

Some people, and this is rare, have actually physical stock certificates instead of brokerage statements. If this is the case you will have to provide photocopies of the certificates, with proof that you have owned the stock for some time. If your down payment comes from these stocks then be sure to document everything in detail.

Gifts

In many cases (especially for first time home owners) a family member or a friend will give them a gift to help them make the down payment. If this is the case, that person is required to also provide what is called a gift letter. This states that the money given is indeed a gift and that it does not have to be paid back at a later date. It must also state the amount of the gift and be accompanied by bank statements detailing the 'giver' can indeed afford the gift.

You should also make a copy of the check and keep a copy of the deposit receipt to ensure that everything is well documented in case there are any future discrepancies.

Retirement Funds and 401K's

Most people today have some sort of money put away for retirement. While people don't often borrow against this for their down payment, it is often used as proof of reserve assets. If this is the case you should provide documentation detailing your savings. This proves that you are a dedicated saver.

If you do need to dip into your retirement to pay for the down payment be sure that you keep a copy of all documentation. This includes a photocopy of any check that is issued; and keep the deposit statement proving that the money you withdrew ended up in your bank account.

Again, this is not a very good idea. Because you pay into your retirement as part of a plan, they see this an expense. Although you are borrowing from yourself, it is still money that you will have to make up at a later date. Plus, cashing out of a portion of your retirement saving means that you will be paying tax on that money. Therefore this is another hit against you in the eyes of the lender. Be very careful before you do this. There are probably better ways to get your money.

Employers

If you have a benevolent boss, there is a chance that he or she will help you out with your down payment. Obviously they feel that an employee will be loyal and stable if they have a place to live while they are building a future with that company. If this is in fact the case, be sure to get full documentation to what extent you are being helped out.

In most cases your employer will ask for the money back, but often at low interest rate taken off of the pay check. So be sure that you have all of the proper documentation stating what the terms of the loan are.

Savings Bonds

Savings bonds are better than cash. Not only are they assets you can liquidate immediately, but also they show that you are a proven saver. Make photocopies of the bonds for your lender as proof that they exist. Also, if you cash the bonds, keep the paperwork provided by the bank.

Property

This can include just about anything you own that has any value. The most common forms of property are:

Automobiles Vehicles Boats

· Furniture

Collections Heirlooms Antiques Art Clothing Instruments

You must estimate the value of these possessions. It is very important to be honest in this appraisal, because the bank knows how much these things are worth and they will look disparagingly at any lying.

The larger the value of any of these items the more detail you have to provide. For instance, if you claim that your guitar is worth $3,000, you should specify that it is a 1967 vintage Fender Jaguar guitar.

You do not have to estimate the value of your property unless you are planning on borrowing money against them for your down payment, or if you plan on selling them for the down payment. It always helps to be conservative.

Selling Your Stuff

If you do have to sell your possessions to make the down payment, you need to provide proof of their market worth, receipts from the sale and documentation that the money from this sale went into your bank account.

If you cannot document the value of an item it might as well be worthless. This means don't list items that may have sentimental value of niche value to idiosyncratic customers.