Assets Can Make The Difference
Assets can make all the difference in whether your mortgage gets approved. Assets represent a reserve that can be sold or drawn upon in hard times to cover your mortgage payment. Here are some different types of assets:
- Cash in checking or savings accounts
- Cash value life insurance
- Stocks, Bonds or Mutual Fund investments
- Real estate
- Cash in retirement savings plans
- Household goods
The value of an asset, for mortgage purposes, is directly related to its liquidity or your ability to easily convert it to cash. Many assets are less liquid or difficult to sell and therefore not as valuable as others. The items at the top of the list are generally given full credit because they are liquid and available for immediate use. As you move down the list the assets either become harder to convert or not worth much because they are used.
Part of the information you will provide your lender is the name, address, and telephone number of all banks, credit unions, and savings and loan associations where you maintain an account. Using that information your lender will mail each of these institutions a form called a Verification of Deposit or VOD. A VOD asks each of these institutions to provide information regarding the types of accounts you maintain such as the account number, current balance, average balance and the date it was opened. They will also ask the institution whether you have any loans which are not being reported on your credit report or if there are any other names or owners on your accounts. This information is very valuable to the lender as it can be used to test the value and stability of the asset.
As indicated above assets can make all the difference in determining whether a loan is approved. With the advent of computerized underwriting, individuals who have poor job history, employment history or credit history can be approved for a mortgage because of the strength, amount or quality of their assets.