A mortgage lender considers many factors while evaluating your application, including collateral (appraised value of the home), credit score (willingness to repay), income (ability to repay) and your assets, which is the cash involved in the transaction and reserves after you close. Assets are one of the least-discussed factors in terms of qualifying for a loan, but they are important to understand.

When you apply for a mortgage, your lender will verify where the down payment and closing costs come from, plus other assets. This means you cannot simply come up with the money. Your lender will need a paper trail to see where it came from. If you show that the down payment came from your savings account, your lender will be more confident in your overall financial picture.

You will need to document the funds used for the down payment and any reserves you have after closing. This is an important step because you may need to rely on your assets and savings if you have a financial setback, and your lender wants to see that you have money set aside.

Lender Requirements

Your lender will verify that you have enough cash to cover monthly mortgage payments without assistance, which means showing financial stability and security. Before you apply for a loan, make sure your assets have been "seasoned," which means any large deposits or transfers have been in your bank account 1-6 months, so the lender can see where they came from and what they were for.

This means you should not have any surprises or sources of money that cannot be traced back.

Common Mortgage Problems

The following are the most common asset-related issues that may come up during underwriting.

• If you have too many cash deposits, it may raise a red flag.
• If you are using gifted money or seller assistance, your lender may be worried about your ability to repay the loan.
• If you have large deposits that appear excessive for your stated income, your lender will want to know where you got the money. They may even assume that you got the money from a loan that is not listed on your credit report.