Liquid Assets

The prospective borrower must have enough verified liquid assets to cover the loan's down payment, closing costs and prepaid items without resorting to borrowed funds as well as additional reserves for the first payments due. These four expenses require cash or easily cashable assets because they are paid at the closing or in the initial months.

The reserve requirement for homebuyers is usually two months of PITI (principal, interest, taxes and insurance). For investment properties, the reserve requirement is typically six months.

With a few exceptions, qualified liquid assets must be verified as having belonged to the borrower or coming from a source that belongs to the borrower. The burden of proof is on the applicant. Failure to document sufficient liquid assets will result in rejection or suspension of the application. Additional details and exceptions are provided below.

The following liquid assets are acceptable in determining the applicant's qualification:

  • Cash on deposit
  • Cash deposits toward purchase
  • Cash gift
  • Secured loan proceeds
  • Sale of assets
  • Life insurance policies
  • Stocks, bonds and money market funds
  • Real estate commissions
  • Seller and lender subsidies
  • Rent credit
  • Pension, IRA and 401K accounts
  • Bonus income

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Real Estate Planning And Prosperity

Real Estate Planning And Prosperity

Entrepreneurs go against the flow. You've a business idea. Lots of individuals have business themes. The difference is that you, the entrepreneur, take action. Realty investors are the same.

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