What Is an Asset Statement for a Mortgage?
Understand the importance of your financial assets in a mortgage application. Learn what lenders look for and how to accurately present your financial standing.
An asset statement is a foundational financial document used during the mortgage application process. It provides a comprehensive snapshot of an applicant’s financial resources, demonstrating their capacity to meet the financial obligations of a home loan.
Understanding the Asset Statement’s Role
An asset statement details the funds an applicant possesses across various accounts. Lenders require this documentation to verify an applicant’s financial stability and ability to afford the mortgage. Its primary purpose is to confirm the availability of funds for the down payment and closing costs.
Beyond initial costs, the asset statement also helps lenders assess an applicant’s financial reserves. These reserves are funds remaining after the loan closes, indicating ongoing financial security. Lenders use this information for risk assessment, ensuring the borrower can manage unexpected expenses without jeopardizing mortgage payments. The statement also offers insight into an applicant’s financial habits and liquidity.
What Your Asset Statement Must Show
Mortgage lenders require specific details from various asset accounts to accurately assess your financial standing. This includes statements from checking and savings accounts, which represent readily accessible funds. Investment accounts, such as brokerage accounts, mutual funds, and certificates of deposit (CDs), also provide evidence of financial resources. Retirement accounts like 401(k)s and IRAs are also considered for their potential value.
Each statement must clearly display the account holder’s name and the financial institution’s name. The statement period, usually covering the last 60 days, must be visible, along with the current or average balance over that time. Provide full, consecutive pages of all statements, even if some pages appear blank.
Lenders also scrutinize the source of any large or unusual deposits. Any single deposit significantly exceeding typical income will require a clear explanation. This ensures that funds are legitimate and not borrowed, which could impact loan qualification.
How Lenders Evaluate Asset Statements
Lenders meticulously review asset statements to verify the existence and accessibility of funds for the down payment and closing costs. They confirm that the balances presented are available for the transaction, which helps prevent issues with funding the loan at closing.
A significant aspect of evaluation involves assessing an applicant’s financial reserves. These are funds that would remain in savings after the down payment and closing costs are paid. Lenders often prefer to see a certain number of months’ worth of mortgage payments held in reserve, typically ranging from two to six months. This provides a buffer against unforeseen financial challenges.
Lenders also carefully examine the source of funds, especially for large deposits. If a large deposit is not clearly from a verifiable source like payroll, a detailed explanation and supporting documentation may be required. This could include a gift letter from a family member, a signed sales contract for an asset, or a distribution statement from a retirement account. Lenders look for consistency in account activity and may flag unusual transfers or unexplained cash deposits for further inquiry.
Preparing Your Asset Statements for Submission
To prepare your asset statements for a mortgage application, gather the most recent statements for all relevant accounts. This typically means obtaining statements covering the last 60 to 90 days directly from your financial institutions. You can usually access these electronically through online banking portals or request physical copies.
Ensure that all pages of each statement are included, legible, and arranged in chronological order. Missing pages or unreadable sections can cause delays in the application process. If any large, non-payroll deposits are present, prepare the necessary documentation, such as a formal gift letter or a bill of sale, to explain their origin.
Once organized, these documents are typically submitted to your loan officer through a secure online portal, direct upload, or encrypted email. Providing complete and accurate documentation upfront streamlines the review process and helps avoid requests for additional information.