You’re ready to purchase a home and step into a new chapter of your life. Or maybe you’re ready to refinance, which also means a new chapter. You could save money on your mortgage every month and then take cash out to pay off credit card debt, afford a new home renovation or go on that dream vacation you’ve always wanted.
In either case, this means you’re ready to apply for a mortgage. How exciting! Asset verification is an important part of the mortgage application process, and while it might sound a bit daunting, it basically means your lender is doing their due diligence to ensure that the mortgage you end up with corresponds to your financial plans and is affordable for you. And that, too, is exciting, because it benefits you, the borrower. AmeriSave is looking to put customers in the best mortgage for them, which is not always the biggest but rather what best aligns with their short-term and long-term financial goals.
So, what is asset verification, and will I have to submit lots of paperwork?
Mortgage lenders need to verify your personal assets to determine what kind of loan you can afford and what your monthly mortgage payments will be . To get the full picture, your lender looks at your net worth and your specific assets (some have more impact than others, which we’ll get into below), as well as your personal debt and liabilities. They do this by reviewing asset statements (bank deposit account statements, including investment, retirement and 401k account balances, tax returns, W-2s, pay stubs, gift letters, etc) but not necessarily “paper” work.
Let’s face it: nobody likes the thought of collecting document after document for asset verification. Fortunately, many lenders today offer electronic asset verification. At AmeriSave, we offer paperless asset verification through AccountChek, which integrates into our loan origination platform. AccountChek allows us to offer streamlined, secure and accurate verification of our customers’ assets. This aligns to our commitment on exceptional customer service, and it translates to less time, less hassle and less worry on your part (accurate asset verification also ensures fraud risk is reduced for you and your mortgage lender). We also work hard to make the entire loan application process smoother with resources like this guide to understanding home loan documents.
Knowledge is power, so let’s brush up on the types of financial assets that lenders look at during the verification process:
- Liquid Cash (including what’s in your checking, savings and/or money market accounts)
- Certificate of Deposit (CD) accounts
- Retirement accounts, including money you draw from a 401k or IRA
- Brokerage accounts
- Investment funds
- Gift funds
- Personal property
Let’s also review some broader asset categories and break down a few of the above examples a bit further.
– These have a cash value (and can quickly be converted to cash in case of a financial emergency), such as the money in your banking accounts. Cash on hand also includes CDs and money market accounts. Your lender will want proof of your available funds, so they’ll ask for account statements to not only verify these assets are available but that they have a similar average balance for the past few months. Cash typically ranks high with lenders because it’s readily available to cover your monthly mortgage payments.
– These assets don’t convert to cash as readily (nor are they guaranteed to hold their value over time), but they are still worth sharing with your lender as part of your asset documentation or portfolio. Think of your personal property, as in cars, real estate properties, artwork, antique furniture and jewelry particularly those that are of enough value to insure. To verify these, financial institutions will want certificates of ownership or purchase documentation.
– Hooray for generous family members or friends. If someone has given you money to help with your down payment or closing costs, you can use this as one of your assets. Your lender will want to verify the gift giver’s bank statement prior to the date of withdrawal, as well as your bank statement showing the deposit of the gift funds into your bank account.
– Though not technically an asset, income still counts. Your lender wants to verify you can make your mortgage payment, so they will need to confirm your employment income . They’ll ask you for your two most recent pay stubs, two years of W-2s and two years of tax returns, both federal and state.
Dos and don’ts
In addition to opting for paperless asset verification, there are other steps you can take to simplify the asset verification process and prepare in advance before you decide to apply for a mortgage.
Do avoid large purchases and cash deposits.
Take care with what you’re spending (and depositing) during the mortgage process and hold off on large transactions. Your lender is reviewing all of your bank accounts to ensure you’re financially stable, and a large purchase could delay your loan approval or closing date. Cash deposits, which are out of the norm and need to be verifiable, could also slow down the process. Deposit checks directly into your online bank account rather than cashing them. Talk to your AmeriSave mortgage banker if you’re not sure what constitutes a large purchase or if you have questions about cash as an asset.
Don’t overdraw your accounts.
A bank statement that shows a series of overdraft fees is a red flag to a potential lender. Avoid overdrawing your checking and savings accounts, which could signal that you spend more than you have and could negatively affect your ability to get approved. Also, don’t haphazardly shuffle money between accounts, which could again raise concerns with your lender on your financial decision making and delay the process.
Do think about your co-applicant.
Applying for a loan with a spouse or family member can create additional sources of income and assets, potentially helping you obtain more favorable loan terms. But keep in mind that, as part of verifying the co-applicant’s assets, they will also look at the co-applicant’s liabilities and credit history, which sometimes can outweigh their income or asset benefits.
Don’t forget how asset verification can affect your mortgage rate.
As we stated, lenders verify your assets to help align your finances with the right type of mortgage, and this includes your mortgage rate. That’s why it’s important to get your finances in order and think through all of your personal assets, so you can include them for consideration during the home buying process.
Understanding the asset verification process ahead of time will make the process much smoother for you and your lender. And at AmeriSave, our approach is to make it even more smooth by being here for you to answer questions, by keeping your information safe and secure, by creating ways to streamline the loan process (such as through AccountChek) and by boosting your overall satisfaction.