CREDIT
The third factor in determining your rate is your credit score. The number ranges from zero to the 850’s. To find a score on either end of the scale is extremely rare (unless there is no score at all – which would automatically be 0). The higher the credit score, the better the interest rate. This is a big factor in determining your interest rate. Please see It's All About Credit for more details.
ASSETS
Assets are a major factor when purchasing a home. This shows the bank that you have saved enough money for the down payment as well as closing costs associated with the mortgage. They want to ensure that you have not borrowed the funds which would have to be repaid. So they usually review 2 months bank statements to see if any large deposits were made. If there are, then they may require proof as to the source of the deposit.
The lender would also like to make sure you have enough money left in the bank after closing to make between 2 to 6 months of payments. These funds are called RESERVES.
Assets can be Checking Accounts, Savings, 401k, Stocks, Bonds, etc. Basic rule for asset qualification is the asset must be capable of being liquidated into cash within 24 hours. That means, you can’t use your car or home because it’s not easy to sell those assets quickly.
There are programs from time to time to where you can State your Assets, or not show any assets. But these programs increase the risk and have a negative effect on your interest rate.
Summary
You need to think about each of the 4 factors the banks use for determining risk and consider your own situation. Think of it as your money which you are about to lend to some stranger. If you found out that Person A owes 5 other people money and haven’t paid them back yet as promised, would you want to lend Person A any of your money?
As we have mentioned throughout these pages, there are numerous loan programs available but not all banks offer all the same programs. That’s why Mortgage Brokers are utilized and originate over 60% of the loans for the lenders. So if you are unsure what program is best suited for your situation and are interested in finding out what program you qualify for, contact a Mortgage Broker (map) in your area.