Analyzing Assets

Lenders process the borrower's assets to analyze the borrower's eligibility in two areas:

  1. Confirm that the applicant has sufficient assets to meet closing costs and program guidelines.
  2. Verify that such assets are acceptable.

The accumulation of assets demonstrates how well the borrower has used his or her income; while the record of liabilities shows how well the borrower has handled debt. A negative net worth generally means that the applicant is over-leveraged (over-borrowed) and could result in rejection.

Mortgage loan applicants do not have to disclose all assets, just enough to qualify. The applicant must show sufficiency in two areas:

  • Liquid assets. The borrower must verify sufficient liquid (cash or easily cashed) assets for any down payment, closing costs, prepaid expenses and reserve requirements.
  • Hard assets & Net worth. The borrower should demonstrate positive net worth. For most borrowers, hard assets must be counted to establish positive net worth.

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Real Estate 101

Real Estate 101

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