Can You Use Assets As Qualifying Income for a Mortgage?

By
Mortgage and Lending with First Heritage Mortgage NMLS #: 938761

Can You Use Assets As Qualifying Income for a Mortgage?My favorite thing about working for First Home Mortgage in Richmond, VA, is the team with whom I work.  We have a dedicated staff of underwriters and product support specialists available to research ways to assist clients with their outside-of-the-box lending needs.  When tough scenarios come up, this experienced team sifts through page upon page of Fannie/Freddie/HUD/investor text to find solutions–and, we are often able to find a solution when other lenders aren’t.

It may surprise you, but sometimes the borrowers with the most income/assets have a trickier time qualifying for a mortgage loan.  It may be because they are self-employed, their assets are tied up in business accounts, or, their income, even while significant, may be declining.

Important information to know if you are short on monthly qualifying income but have assets on-hand is the ability to use those assets to supplement qualifying income.  Fannie Mae will not allow it, but, Freddie Mac will, so you would have to meet Freddie’s other guidelines.  Here are the rules for using this income to qualify per Freddie Mac’s rules: (source)

Assets may only be used for qualification if the mortgage meets all of the following requirements:

    • Is secured by a one-unit primary residence or second home,
    • Is either a purchase transaction mortgage, “no cash-out” refinance mortgage, or relief refinance mortgage , and has a maximum loan-to-value (LTV)/total LTV (TLTV)/Home Equity TLTV (HTLTV) ratio of 70

Note:

    • The borrower must not currently be using the eligible assets as a source of income.
    • The asset source must meet all the associated requirements listed under “Asset eligibility requirements” as indicated in Guide Section 37.13(e)(1)

To qualify the borrower for the mortgage:

    • Determine that both the source of the asset and the amount of the asset source are reasonable and stable for each asset qualification source
    • Include a written analysis of the asset qualification source and amount in the Mortgage file
    • Meet the requirements of Guide Section 37.13(e), regardless of the underwriting path of the mortgage
    • To calculate asset sources, use 70% of the balance of the eligible asset less any funds required to complete the transaction (e.g., down payment, Closing Costs, Financing Costs, Prepaids/Escrows), divided by 360 months, regardless of loan term or account balance.

The above information may be a little over your head if you’re not a loan officer, but please feel free to contact me if you think this information could help you purchase your next home.  As I write about here, don’t take no for an answer when you’re trying to finance a home purchase.  You may have just not spoken with the right lender yet who is willing/able to find the lending solutions you need for your home pre-approval.  At First Home Mortgage, we are dedicated to finding residential financing solutions for our clients.

This post is dedicated to Marci, Underwriter Extraordinaire.

Originally posted on Loan Officer Lately 

Comments (5)

Tony & Darcy Cannon
Aubrey and Associates Realty - Layton, UT
The C Team

Whitney, Interesting post!  Some great information to have for potential buyers, have a great day!

Jul 10, 2014 03:24 AM
Whitney Watson
First Heritage Mortgage - Henrico, VA

Thanks for stopping by Tony & Darcy!

Jul 10, 2014 04:58 AM
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning Whitney. You are right on top of your profession. It is very obvious that your clients will be well served to have you handle their mortgage needs.

Jul 10, 2014 07:45 PM
Jimmy Van Smith
Frisco, TX
Residential Mortgage Loan Originator

Excellent update Whitney. An informed mortgage professional knows the differences in the agency's guidelines to help their customers.

Jul 11, 2014 12:00 AM
Robert Vegas Bob Swetz
Las Vegas, NV

Hello Whitney ... Love your post and information, and it looks by your comments that other people do also! Your post have been featured to the group:

SUCCESS AT ACTIVERAIN

VB 

Jul 13, 2014 12:53 PM