B3-4.4-01, DU Asset Verification
Liquid Assets
When you apply for a mortgage and it is checked by DU (which stands for Desktop Underwriter, a system used to evaluate your loan), the system looks at your easy-to-access (liquid) assets. Liquid assets are funds you can quickly turn into cash. DU checks these to help decide if you can afford the loan. However, if you can get approved for the loan without mentioning some of your assets, you don’t have to include them in your application.
Here’s what counts as liquid assets:
– Bonds
– Bridge Loan Proceeds
– Cash-on-Hand (but only for specific HomeReady loans)
– Cash Value of Life Insurance
– Certificate of Deposit
– Checking accounts
– Gifts (even if they’re not yet deposited)
– Gift of Equity
– Grants (also not deposited)
– Individual Development Account
– Money Market accounts
– Mutual Funds
– Net Equity
– Other Liquid Assets
– Proceeds from selling real estate before or on the closing day
– Proceeds from selling non-real estate assets
– Retirement accounts
– Savings accounts
– Secured Borrowed Funds
– Stocks
– Stock Options (but only if they’re vested)
– Trust Account
It’s important to remember that some of these asset types might not be listed in the system your lender uses to process your loan.
Non-Liquid Assets
DU doesn’t look at assets that are hard to quickly turn into cash (non-liquid assets). You don’t need to verify these when applying, and DU won’t ask for them. Non-liquid assets include:
– Cash Deposit on Sales
– Net Worth of Business
– Other Non-Liquid Asset
– Unsecured Borrowed Funds
Again, some of these might not show up in your lender’s system.
Reserve Requirements
DU decides how much you need in reserve (extra money saved after you buy the home) based on how risky your loan seems. Having more money in reserve can make your loan application look better and might help you get approved.
There are other rules about how much you need saved up if you’re buying multiple properties or if you need a minimum amount in reserve. These rules can be found in:
– B2-2-03, Multiple Financed Properties for the Same Borrower
– B3-4.1-01, Minimum Reserve Requirements
Asset Values in the DU Underwriting Findings Report
After DU looks at your loan, it gives a report that shows:
– Total Available Assets: All the quick-to-access assets you told DU about.
– Funds Required to Close: The money you need for the home purchase and any debts you’re paying off with this loan, except the mortgage on the home you’re buying.
– Reserves Required to be Verified: How much in reserve you need to show you have.
– Total Funds to be Verified: The total money you need at closing plus the reserve.
– Excess Available Assets, not required to be verified by DU: Any extra money you have that DU doesn’t need to check.
If DU says you have Excess Available Assets, you generally don’t need to prove you have this money.
Non-Occupant Borrower Asset Requirements
If someone who won’t live in the house (a non-occupant borrower) is helping you buy the home, their assets can count towards the 5% you need to contribute. You must include their assets in your loan application. DU adds up the money from both you and the non-occupant borrower to calculate total available assets.
Recent Related Announcements
A recent notice related to this topic was Announcement SEL-2020-07, issued on December 16, 2020. This might provide more updated information on asset verification.
References
For more details, visit DU Asset Verification of the Fannie Mae Selling Guide.