I've applied for a sub40K mortgage and my credit union is asking for a list of assets available such as a retirement account or accounts with other financial institutions. They have hinted that they may not be able to approve the mortgage if I can't show assets. (That's why I applied for the mortgage... to build an asset!)
Currently I don't have any real assets or real property other than personal property and business inventory from Income on my schedule C.
Would this asset requirement happen to be an industry standard and is there a creative way to get around this or another way to deal this requirement?
Do you have any bank accounts that aren't with the credit union? List those.
If you don't have any assets, just tell them that you don't have them. If there is any confusion, as for a copy of their underwriting guidelines, so that you can see clearly what they are checking.
There is no asset requirement (to my knowledge) but they may have risk tolerance guidelines where they may give you a higher interest rate or request a larger down-payment.
@David Martin lenders want to see liquid assets so that if the property can not be rented you will be able to continue to make the mortgage payments until it is rented. Lenders typically like to see liquid reserves of around 6 to 12 months PITIA (monthly payment of principal, interest, taxes, insurance and association fees). Some lenders might consider your retirement account to meet the liquid reserves requirement.
Do they mean reserves? I know it is much harder to find lenders for mortgages under $50K, but maybe they mean they want to see the standard 3-6 months of reserves in an account in addition to any down payment funds required for the loan. Or maybe because it's under $50K, they are treating it more like a personal loan backed by other assets than the home itself? I would think they could tell you exactly what qualifies and how liquid it has to be.
Seller financing avoids all this stuff
You need to understand existing financing to do seller financing
the balance of the note is the payment and whether not fixed or ARM
Seller financing includes installment sales on Franklin properties and lease with option to lease purchase master lease etc.
Okay thanks! I'll request their underwriting guidelines. Are there cons to using gifts for the down payments?
My understanding is that depending on the institution, the underwriters require a certain amount of accessible cash to approve the deal. This amount needs to cover the down payment, bank cost of the mortgage, prepayments (insurance, taxes, ect) and about 2 months of mortgage payments.
My mortgage broker is always nice to enough to calculate the number the underwriters will look for, so I don't have to gather all my account statements. For example, I'm doing a refinance right now, and he told me straight up I need to show two months of statements for an account(s) valued greater than $5000. I like using my 401k, because there won't be any unexpected withdrawals or deposits I'll need to explain.
Don't be afraid to ask how much money they need to see, it will make the process easier for everyone. Be straight forward if you don't have the amount, as there are other options available.
Thank you all for your replies! I see that it would be wise to prepare for this type of stuff before applying! I never knew about required assets or their seasoning required.
@Brian Gibbons I'm with you on the seller financing and it will be a major tool that I will use going forward. Learning to be an "transaction engineer" is priceless!
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