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Mortgage Asset Types

Providing a clear picture into your financial assets helps lenders assess how much mortgage you can afford as well as the risk associated with the loan. While many of these asset types will be familiar, understanding how they are used within a mortgage application will be helpful. Below are all of the various types of assets that can be used as part of your application and what you need to consider when listing these assets.

Checking & Savings Account

Deposit accounts bearing modest interest or no interest, held at a financial institution that allows withdrawals and deposits.

This is the most common asset type for your most accessible and liquid funds that can be used on your mortgage application for closing costs, down payment and reserves.

Retirement Account

This can be an individual account (IRA) or employer-sponsored account (401k). 

On your mortgage application, if the value of your retirement account is at least 20% more than the amounts needed for closing costs and down payment then proof of liquidation isn’t required.

Brokerage Account

A non-retirement investment account that allows you to invest in stocks, bonds, mutual funds, ETFs and stock options. 

On your mortgage application, if the value of your brokerage account is at least 20% more than the amounts needed for closing costs and down payment then proof of liquidation isn’t required.

Earnest Money Deposit

On a purchase transaction, this is the amount you have already paid to the seller’s agent as a sign of good faith. 

Earnest money deposits cannot be used towards financial reserves on a mortgage application.

Personal Gifts

A gift of cash received from a relative or unmarried partner. 

On your mortgage application, gifts can be used for a down payment, closing costs and/or reserves, but only on primary and second home purchases.

Business Account

The funds present in a business account of a self-employed borrower. 

You can use the funds on your mortgage application for down payment, closing costs and reserves if you are listed as an owner on the account and withdrawal of the funds will not negatively impact your business.

Certificate of Deposit Account

A certificate issued by a bank to a person depositing money for a specified length of time.

Trust Account

A fund consisting of assets belonging to a trust, held by the trustees. 

Trust accounts are acceptable on your mortgage application as long as you have immediate access to the funds.

Anticipated Sales Proceeds

Funds derived from the imminent sale of currently owned property.

If the property is listed for sale or under contract then the net proceeds can be used for down payment, closing costs and reserves. This includes funds from a “like-kind exchange” aka, a “1031 exchange”. Proof of sale is required to use the funds for the down payment or closing costs.

Borrowed Funds Secured by an Asset

This is a loan against some asset that you own. Assets that can be used include automobiles, artwork, collectibles, real estate, savings accounts, certificates of deposit, stocks, bonds, and 401(k) accounts. Just remember that the payment amount of this loan will be considered in your monthly debt on your mortgage application.

Cash Value of Life Insurance

The cash amount offered to the policy owner upon cancellation of the contract. 

The cash value of life insurance can be used on your mortgage application for down payment and closing costs with proof of liquidation and for reserves regardless of liquidation. If additional debt is incurred due to liquidation it will be considered in your monthly debt.

Employee Stock Plan

A benefit given by a company to an employee to buy stock in the company at a discount. Only include the value of vested amounts as non-vested amounts are ineligible. 

If the value of the Employee Stock Plan is at least 20% more than the amounts needed for closing costs and down payment then proof of liquidation isn’t required.

Rent Credit for Option to Purchase

Using rent paid to go towards a down payment of the property you are currently renting according to a specified rent-to-own contract with the landlord. 

Rent credit for option to purchase can only be used if you are purchasing the property in which you are currently renting. The difference between rent paid and market rent for each month can be used towards the down payment.

Bridge Loan Proceeds

A short-term loan with relatively high-interest used until permanent financing is secured. These are typically used in financing the construction of a new property.

Sale of Personal Assets

Selling personal assets for cash. Keep in mind that you can’t sell the item(s) to anyone involved in the transaction (seller, seller’s agent, etc.).

Anticipated Savings

This is money you anticipate to save from your income before closing but don’t have yet. When completing your mortgage application, remember that any anticipated savings amount will be deducted from your monthly income.

Individual Development Account

An account where a nonprofit agency will match your deposits into a savings account that has been designated as an account used solely to purchase a home. 

Individual development accounts cannot be used towards financial reserves when applying for a mortgage

Money Market Account

An interest-bearing account at a bank or credit union that offers higher interest rates than traditional savings accounts.

For the purpose of your mortgage application, money market accounts are treated the same as a checking or savings account.

Pooled Savings

An account where you make regular contributions to a pooled fund with money from other investors. Only include the amounts you’ve deposited (not any other party’s deposits). These funds may only be used for the down payment.

Trade Equity

The exchange of property as part of a down payment when opting to buy another property. 

Trade equity can be used to supplement down payment and closing costs but not to cover the entire amount nor towards financial reserves.

Sweat Equity

An interest or increased value in a property earned from labor toward upkeep or restoration. This is only eligible for down payment on a Fannie Mae HomeReady Mortgage.

Cash on hand

Money that hasn’t been deposited with a financial institution. Cash on hand is only eligible for down payment and closing costs on a Fannie Mae HomeReady Mortgage.

Undrawn HELOC

Having an open but undrawn HELOC as a spare source of cash can help contribute to the closing on a purchase transaction.

Interested Party Contributions (IPC)

IPCs are costs that are normally the responsibility of the property purchaser that are paid directly or indirectly by someone else who has a financial interest in, or can influence the terms and the sale or transfer of, the subject property.

Gifts of Equity

The seller gifts a portion of their equity in a property to the buyer as a credit to the transaction. Gifts of Equity would only apply to a purchase transaction mortgage application.

Donations From Entities

Monies received through a governmental or non-profit institution. Donations from entities may be used for down payment, closing costs and reserves but only on primary residence transactions.

Disaster Relief Grant or Loan

Monies received through a governmental or non-profit institution specifically for disaster relief.

Employer Assistance

Monies received directly from your employer in the form or a grant or loan to be used for down payment or closing costs. These funds can only be used on primary residence transactions. They can be used for reserves as long as the assistance is not an unsecured loan.