Assets for home loan application
Quick insights
- Mortgage lenders review your assets to assess your ability to cover your down payment, closing costs and reserves.
- Assets can include bank statements, investment accounts, retirement funds and funds from the sale of other assets, such as previous home.
- Your assets are usually verified through bank statements, brokerage account or documentation from financial institutions.
When you are applying for a home loan, your mortgage provider wants to understand your full financial picture, not just your income and credit score. Assets give loan providers greater confidence that you can afford the initial costs of purchasing a home and be financially stable as a new homeowner. From checking accounts to investments, the assets you report can impact your loan approval and terms.
Why does reporting your assets matter to a lender?
Lenders use asset information to evaluate your ability to afford and maintain a mortgage; having more assets can improve your chances of approval and potentially secure better loan terms. Assets may indicate that you can afford the down payment, cover closing costs and potentially maintain mortgage payments in the event of a financial disruption. Strong asset reserves may even help you qualify for better mortgage rates or loan terms, especially if your credit or income is on the lower end of the approval range.
Types of assets to include on your mortgage application
When filling out your home loan application, it’s important to add the assets that reflect your financial situation and ability to repay the loan. Any additional documents a mortgage provider requests may be related to the assets you list:
- Checking and savings: This includes your checking and savings accounts, funds that are easy to access. Loan providers view this as your most liquid form of assets, often used for the down payment and closing costs.
- Investment accounts: These include brokerage accounts, stocks, bonds, mutual funds and money market accounts. While these may fluctuate in value, they still reflect your financial strength because they might be liquidated if needed.
- Retirement accounts: 401(k)s, IRAs, pensions and other retirement savings also count as long-term assets. Even though penalties may apply for certain withdrawals, loan providers still factor retirement accounts into your financial profile.
- Real estate: You can list your primary residence (if it’s paid off or you’re refinancing), as well as second homes, rental properties or land. Loan providers consider the equity you have in these properties, the portion you own outright, as part of your total assets.
- Business ownership or valuable personal property: If you own a business or have high-value items, these may also count as assets on a mortgage application. These items often require detailed documentation or appraisal. For example, jewelry, vehicles or collectibles would need to be sold with complete documentation of the cash proceeds to be considered as assets on a mortgage application.
- Gift funds (when applicable): If you’re receiving gift money from family to help with your down payment, this counts as an asset, but loan providers will ask for a gift letter and proof that the money is not being loaned.
How mortgage lenders verify your assets
To ensure your reported assets are legitimate and sufficient, mortgage lenders will request documentation and perform several verification steps:
- Reviewing recent bank and investment account statements (usually 60 days’ worth)
- Requesting verification directly from your financial institution through a verification of deposit (VOD)
- Looking for signs of large, unexplained deposits, which may require additional explanation or proof of source
- Confirming ownership and equity in any properties through tax documents or mortgage statements
- Requesting a gift letter if funds are being gifted, confirming the money doesn’t need to be repaid
How assets influence loan terms and decisions
Assets help mortgage lenders assess your risk level and overall financial stability. The stronger your asset profile, the more flexibility and confidence loan providers have when offering you a home loan. Here’s how your assets can impact mortgage terms:
- Better loan approval odds: A healthy asset reserve reassures loan providers that you can cover upfront costs and manage your mortgage if your income is disrupted.
- Lower interest rates: Lenders may offer more competitive rates to borrowers who show strong financial reserves, as they’re seen as less risky.
- More favorable loan terms: With more assets, you may qualify for larger loan amounts or avoid requirements like mortgage insurance.
- Stronger debt-to-income (DTI) support: If your income alone pushes the lender’s debt-to-income limit, having solid assets may help offset that risk in the lender’s eyes.
- Easier underwriting process: A documented asset profile can make your application smoother and give underwriters fewer concerns to flag.
- Eligibility for asset-based loans: In some cases, borrowers with significant assets but limited income may qualify for asset-based mortgages. This is when approval is based primarily on the value of your verified assets instead of traditional income documentation.
FAQs about assets in mortgage loan applications
Here are some common questions to help you feel more confident during the process:
Do I have to report every asset I own?
No, but you should report all significant assets that strengthen your financial profile. Focus on liquid accounts, investment funds, property equity and anything that can be used to cover mortgage-related costs.
Can I use gift money as an asset?
Yes, as long as the gift is well-documented. You'll need a signed gift letter and proof that the funds are not a loan.
Will loan providers look at my retirement accounts?
Yes. 401(k)s, IRAs and pensions can count as assets, even though they’re not usually accessed for a home purchase. Mortgage lenders view them as a sign of long-term financial health.
What if my assets are tied up in investments or property?
Typically, it is fine if your assets are tied up in investments. Lenders will often still count them, though they may be considered less “liquid.” You will need to provide supporting documentation like account statements or property records.
Do I need to keep my assets in one account?
Not at all. Just be prepared to show financial statements for any account you list on the home loan application. Make sure there’s a clear paper trail, especially for any recent large deposits.
In summary
Assets might be an essential part of your home loan application. They give mortgage providers more insight into your financial foundation and can influence homebuying, from loan approval to interest rates. By understanding which assets to include, how they’re verified and how they affect your loan terms, you’ll be better prepared to present a strong application and move confidently toward homeownership.
