There are many stages in the process of buying a home and you must successfully go through each one before you are allowed to purchase a property. As most people know one of the main barriers for buyers is capital. Evidently, without money you cannot buy a property. However, to support you with the purchase most people can get a home loan or mortgage, which is the only way for many individuals to be able to afford a new property.
During the stage where you apply for a home loan application, the mortgage lender will need to verify your income and any assets you may owe to determine how much you can afford as well as how much interest you should be charged on your loan. This may be a bit overwhelming and make you feel that it will make the process more difficult, but this benefits you as it will ensure that you are making an investment you can afford in the long run. This article will provide you with a guide to income and asset verification for a home loan application so that you know what to expect during this stage as well as get yourself ready with the documents to simplify the process.
What is an Asset Statement?
An asset statement is essentially a document that describes your net worth and assets that you own in a comprehensive manner. A verification of your assets and income is a requirement whenever you apply for a mortgage so that this can be approved. This is an important step of the home buying process as it lets the lender know that you can afford the mortgage.
What Assets Do I Need to Disclose on My Application?
An asset is basically a type of item of economic value, which the owner can turn into cash. An example of assets include investment properties, savings accounts and jewellery. There are two types of assets, including liquid and non-liquid. Cash and savings accounts are liquid assets, whilst cars, businesses and homes are seen as non-liquid as you can turn them into cash as quickly. During your application process, lenders will want to ensure that you have enough liquid assets as a way to make your mortgage payments if anything happens to your main source of income.
What is Verification of Income and How Does it Relate to Asset Verification?
Even though your income is not necessarily recognised as an asset, it is fundamental to your financial stability and you will need to verify this to support your mortgage application. When a lender requests an income verification, they are assessing whether you have the financial means to meet your monthly mortgage payments to ensure that you do not borrow more than you are able to repay.
How to Get Asset Statements?
In most cases, obtaining asset statements is fairly simple. You can request the appropriate documents to evidence your finances from your bank, employer or broker. Some documents required include a statement of annual or monthly salary (depending on lender’s request), statement or checking and savings accounts as well as any brokerage statements. This will provide you with the evidence you need for your liquid assets. The experts at Mr Pay Stubs suggest that this process can be slightly more difficult if you are a self-employed business owner – in which case you may benefit from utilizing an appropriate website to generate your paychecks and received income. If you own any non-liquid assets, you will have to demonstrate documentation from when you purchased the asset to evidence that you are the legal owner.
How to Prepare my Asset Statements?
Ensuring that you have your finances properly organised is essential for your mortgage to be approved, not just on the day of request but also during the months leading up to this. The lender will investigate your finances background deeply, therefore having everything in order is crucial to increase your chances of getting a mortgage approved. A few months before you seek approval for a mortgage, make sure that you have the required savings in your account. Lenders will want to see that you have had the savings for some time (generally, a few months). Moreover, you should not let your checking account get into overdraft as this is seen as a major red flag by lenders. Essentially, you should present yourself as a very financially stable individual to the lenders for a few months before you can get approved for a home loan application.
When you want to buy a process, having your income and assets verified is essential so that you are approved for a mortgage. Having an understanding of what this involves will help you significantly, therefore make sure you read the information discussed above so that you can get familiar with this process.