Many buyers have questions about what assets they are able – and unable – to use to purchase a home.
At a high level, lenders are looking for proof that the assets they will be using are either their own, or in the form of a gift from a legitimate source.
Lenders, in asking for asset documentation, want to see at least 60 days of statements showing that much history of the money the buyer wants to use. If the buyer recently acquired the money, the lender will want to see a paper trail with a signed letter of explanation setting out the legitimate circumstances under which the money was obtained.
Gifts are another area where lender guidelines need to be followed. Certain people, such as blood or by-marriage relatives, are able to give cash gifts. However, lenders want to know where this money is coming from, and if it is legitimately the giver’s money. Others, such as close friends, or even fiancé(e)s, are ineligible givers.
If you have little cash but own things such as cars and motorcycles, you need to realize that you must plan on selling these items to use as funds in the transaction; the items themselves are unable to be listed as assets on a mortgage application. As well, you would need to put the funds in a liquid account such as a checking or savings account, and a full paper trail needs to be provided to the lender.