Introduction
Fannie Mae, a government-sponsored enterprise, has rules about certain assets when you’re getting a mortgage. Assets include the money and property you own. Understanding these rules helps lenders decide if you can afford a mortgage.
Asset Verification Documentation
When you apply for a mortgage, the system used by Fannie Mae (known as DU) will tell the lender what documents you need to prove your assets. Sometimes, the lender might ask for more documents than DU requires, especially if your situation is unique. For refinancing, if you need to prove assets worth $500 or less, DU won’t ask for any documents.
Depository Assets
Depository assets are your bank accounts. For buying a home, you’ll need to show bank statements from the last two months. For refinancing, one month’s statement is enough. These statements need to be recent, within 45 or 90 days of applying. Instead of statements, a form called Verification of Deposit can also be used. If DU confirms your assets electronically, you just need to follow what it says, even if it’s different from what’s mentioned here.
Bridge Loan
If you have a short-term loan to help buy your new home before selling your old one, it’s called a bridge loan. On your loan application, you list it as an asset but don’t double-count it if you’ve put the loan money in your bank account. If you’re using a bridge loan, remember to reduce your expected profit from selling your old house by the loan amount to avoid counting it twice. You might also need to list the bridge loan as a debt.
Cash Deposit on Sales Contract (Earnest Money)
Earnest money is a deposit you make to show you’re serious about buying the home. On the loan application, it reduces the amount you need to close the deal. It’s assumed you’ve already paid this from your bank account, so it shouldn’t be listed as a current asset.
Gifts and Grants
Money given to you as a gift or grant for buying a home doesn’t need to be paid back. On the application, say whether you’ve deposited these funds into your bank account. If you have, include it in your total assets. If not, just note the amount as a gift or grant.
Gifts of Equity
A gift of equity happens when someone sells you a home at a price below its market value, essentially gifting you part of the home’s value. This should be listed as a gift on your application and must meet certain Fannie Mae rules.
Net Equity from Properties Pending Sale
If you’re selling a home, you’ll calculate how much money you’ll make after paying off your mortgage and other selling costs. This amount is considered an asset. If you have a bridge loan, subtract its amount from your expected profit. DU will adjust your available funds for closing accordingly, whether the profit is positive or negative.
Proceeds from Sold Properties
If you’ve sold a property, the money you got from the sale should be in your bank account. This is considered a liquid asset, meaning it’s cash or something easily turned into cash.
Other Liquid Assets
You might have other assets you plan to sell before closing, like a car or stocks. List these in the asset section of your application. If you’re using life insurance or expecting a tax refund, include those too. You’ll need to prove the asset’s value and that it’s been turned into cash.
Secured Borrowed Funds
If you’re borrowing against something you own, like a retirement account or another property, list the loan amount as an asset. But, you’ll need to reduce the value of the asset you’re borrowing against by the loan amount. For example, if you borrow $10,000 against a $30,000 retirement account, list $10,000 as the loan and $20,000 as the retirement funds. Loans against liquid assets don’t need to be listed as debts, but loans against things like real estate do.
References
For more details, visit Requirements for Certain Assets in DU of the Fannie Mae Selling Guide.