Tricks for Satisfying a Mortgage Lender’s Asset Requirement

Since the Great Recession, it is practically impossible to buy a house in the Beehive State purely on credit. You need to put down some money to move into your property with equity already built on it.

Furthermore, you need to prove you have enough emergency savings to cover two months’ worth of Utah home loan payment in case you lose your job or get sick. And then there are the closing costs.

These out-of-pocket expenses make it hard to attain homeownership for a reason. But you can speed up the process if you make the right decisions.

Below are some of the strategies you should seriously consider to meet your prospective mortgage lender’s asset requirement more quickly.

Buy a Smaller House

The total amount of assets you need to prepare to qualify for a home loan is directly correlated to the size of your debt. If you want to borrow more, your minimum down payment requirement goes up and so as your minimum cash reserves. You have to lower your maximum purchase price to help drive down all of your housing costs during and after the sale.

Take Out a Piggyback Loan

It is not ideal to acquire debt to supplement your down payment, but it is an option if you apply for a mortgage that sits behind your primary one. Yes, dealing with two home loans will increase your overall cost of borrowing, but it can help you avoid private mortgage insurance. 

Move All of Your Funds into One Bank Account ASAP

One of the reasons why mortgage borrowers struggle to build acceptable savings is because they fail to season the funds. Not all forms of wealth can count as allowable assets, and a lender will only accept those that have stayed in your designated bank account for at least two months.

To avoid raising some questions, avoid making large deposits at least 60 days before you submit your mortgage application.

Present VODs Instead of Bank Statements

Generally, a mortgage lender wants to see little to no activity in your bank account in the past two to three months. It says a lot about your liquidity and discipline.

When you are told to produce bank statements to see the paper trails of your finances, ask if you could verify deposits (VODs) instead. These documents reveal the total balance in your account and the average in the past two months.

Shop Around for Third-party Services

When it comes to closing costs, understand that your lender does not charge some fees. Instead, other professionals, like a home inspection, involved in the real estate sale process, collect them.

Man handing house keys

You can reduce your total bill at settlement by using third-party services elsewhere. For instance, finding a cheaper homeowner’s insurance rate could lessen your recurring closing costs.

Use a Lender Credit

Ask your lender to roll all of your closing costs into your mortgage, so you do not have to pay them upfront. The other party can agree and impose a lender credit, which will slightly increase your interest rate. If you see yourself relocating after a couple of years, you can even save money out of this arrangement.

All of these strategies are worth the consideration, but do not attempt to game the system. Asset requirements are in place to protect not just lenders from borrower delinquency but also your finances from yourself if you insist on buying a house you can’t honestly afford.