Introduction to Asset Verification
When buying a home, you might need to use some of your investments like stocks, bonds, or mutual funds to help cover the costs. This can include your down payment (the initial payment when you buy a home), closing costs (fees and expenses you pay to finalize the mortgage), and reserves (extra money lenders require you to have on hand after closing). Lenders need to make sure you really own these investments and that they’re worth enough to cover these costs.
How to Verify Different Types of Assets
Stocks and Mutual Funds
To verify your stocks or mutual funds, the lender will ask for your most recent statement from where your investments are held. This could be a monthly or quarterly statement. If you have a stock certificate (a physical document showing stock ownership), you can provide that along with a recent stock list from a newspaper that shows the stock’s value around the time you apply for the loan.
Stock Options
Stock options are a bit different. These are the options given to you by an employer to buy company stock at a set price. To verify stock options, you need to show how many options you have, the price at which you can buy the stock (option price), and the current price of the stock. This shows how much money you could make if you decided to buy and then sell the stock. However, if your stock options aren’t “vested” (meaning they’re not yet available for you to use), you can’t count them towards your home buying costs.
Government Bonds
For government bonds, the lender will look at what you paid for them unless you can show what they’re currently worth (their redemption value). This might be the amount you can sell them for now.
Using These Assets
If you’re using these assets for your down payment or closing costs, and their value is at least 20% more than what you need for these expenses, you don’t have to show proof that you’ve sold them. If the value is less than 20% over what you need, then you’ll have to prove you’ve sold the assets and have the money ready to use.
For reserves, the full value of your assets can be considered without needing to sell them. This means if you’re required to have extra money available after buying your home, you can count the full value of these investments towards that requirement.
Special Note on Retirement Accounts
If you’re thinking of using your retirement accounts (like a 401(k) or IRA) to help with home buying costs, there are specific rules for this. These are covered in a different guideline, referenced as “B3-4.3-03, Retirement Accounts.”
Additional Information
This guideline doesn’t include any recent updates or changes. However, it’s part of a larger set of rules and recommendations for lenders and borrowers, ensuring the mortgage process is clear and fair.
If you have more questions about these rules or how they might apply to your situation, it’s a good idea to ask directly for advice from a mortgage professional or the lender you’re working with.
References
For more details, visit Stocks, Stock Options, Bonds, and Mutual Funds of the Fannie Mae Selling Guide.