People often ask us if their net worth affects whether they will be approved for a mortgage. The simple answer is NO.
Net worth is defined as a borrower's assets minus their liabilities. In other words, their net worth is the value of the things they own (including money in the bank) minus the amount of money they owe.
As an example, if someone has $5,000 in the bank and owns a car worth $15,000, their assets are $20,000. If they have $15,000 in credit card debt and owe $10,000 on a car loan, they have $25,000 in liabilities. Assets ($20,000) minus liabilities ($25,000) gives them a net worth of -$5,000. So they have a negative net worth of $5,000.
Does a mortgage lender care that they owe more than they have in assets? Nope - not at all.
The only thing a lender cares about is whether a borrower makes enough money to pay the mortgage, and whether they have a history of paying their bills on time. Net worth has nothing to do with income or paying bills, so no one should worry about their net worth when applying for a mortgage. Having a positive net worth does not help, and having a negative net worth does not hurt. Mortgage lenders just don't care.
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