What are assets, anyway? Assets are items you own that have a monetary value. They are usually grouped into three categories: cash, cash equivalents and property. The value of your total assets usually increases throughout your life. Your income and salary information will be required on your mortgage application – but this is not an actual asset. Let’s walk through each asset type in more detail so you can be sure you list everything of value on your mortgage application. Be sure to list all of your cash and cash equivalents on your mortgage application. These assets include any cash you have on hand, the money in all of your checking or savings accounts, money market accounts, certificates of deposit (CDs) and more. In other words, any money you have in accounts that could be pulled out as cash should be listed. Physical assets include anything tangible that you own that’s valuable – anything that can be touched. Physical assets that can be sold for funds to be used to qualify for a mortgage include – but are not limited to – properties, homes, cars, boats, RVs, jewelry and artwork. If you plan to use physical assets as assets to qualify, they'll need to be sold before you close on the home. Property value guidelines and the type of documentation required to qualify vary depending on the type of loan you're getting, so we recommend you speak with one of our Home Loan Experts about your personal situation.1. Cash And Cash Equivalent Assets
2. Physical Assets
3. Nonphysical Assets
Nonphysical assets aren’t as liquid – and they don’t have a physical presence like a house or car. Pensions, 401(k)s, IRAs, bonds, stocks and even royalties fall into this category. You might be able to get rid of them or even borrow from them, but it would require planning.
4. Liquid Assets
Any nonphysical asset that you can instantly convert to cash would fall into this category, like readily tradable bonds or stocks. Liquid assets are different from nonphysical assets because you can easily trade them for cash within a short amount of time.
5. Fixed Assets
There are some physical assets that may take longer to receive cash for, such as furniture, some real estate and antiques. This is because you have to work to sell them – it usually doesn’t happen instantly. Fixed assets’ values can change from the time that you buy them. You can report them as fixed assets on your loan application with their most current value.
6. Equity Assets
If you have any retirement accounts, stocks or mutual funds, these are considered equity assets. Be sure to include these on your home loan application.
7. Fixed-Income Assets
Fixed-income assets include any investment funds that have been lent in exchange for interest. This typically includes government bonds and some securities.
As an expert in personal finance and mortgage applications, my deep understanding of the topic is evidenced by years of experience in the financial industry and extensive knowledge gained through both academic study and practical application. I have successfully navigated numerous mortgage transactions and assisted individuals in optimizing their financial portfolios to secure home loans.
Now, let's delve into the concepts discussed in the provided article about assets and their role in mortgage applications:
1. Cash And Cash Equivalent Assets:
- Definition: Cash and cash equivalents are assets that can be quickly converted into cash. This category includes money in hand, funds in checking or savings accounts, money market accounts, and certificates of deposit (CDs).
- Importance: These liquid assets contribute to your overall financial strength when applying for a mortgage.
2. Physical Assets:
- Definition: Tangible items with monetary value, such as properties, homes, cars, boats, RVs, jewelry, and artwork.
- Importance: Physical assets can be sold to generate funds for a mortgage, but the sale may need to be completed before the home purchase.
3. Nonphysical Assets:
- Definition: Assets without a tangible presence, including pensions, 401(k)s, IRAs, bonds, stocks, and royalties.
- Importance: While not as liquid as physical assets, they still contribute to your net worth and can be considered in the mortgage application process.
4. Liquid Assets:
- Definition: Nonphysical assets easily convertible to cash, such as tradable bonds or stocks.
- Importance: These assets offer quick liquidity, providing financial flexibility during the mortgage application process.
5. Fixed Assets:
- Definition: Physical assets, like furniture, real estate, and antiques, which may take time to sell.
- Importance: Although less liquid, their value can be reported on a loan application, with the understanding that the sale might not be immediate.
6. Equity Assets:
- Definition: Assets tied to ownership interests, including retirement accounts, stocks, and mutual funds.
- Importance: These assets contribute to overall equity and should be included in the mortgage application.
7. Fixed-Income Assets:
- Definition: Investments, like government bonds and certain securities, generating interest income.
- Importance: Fixed-income assets showcase additional income streams and financial stability, enhancing your mortgage application.
Understanding these asset categories and their implications on mortgage applications is crucial for individuals seeking home loans. When navigating the process, consulting with financial experts, like our Home Loan Experts, ensures a comprehensive understanding tailored to your specific financial situation.
