Assets

Assets may be the easiest thing to figure out about a loan.  You either have them or you don't.  Assets are more important for purchases than refinances because, for purchases, you have to show the money you can put for a down payment and to cover closing costs.  However, sometimes for a refinance you will have to show assets or "reserves", if you are doing a cash-out refinance or if you are paying money towards your refinance.  Some lenders, us included, will not pre-approve you unless you can show enough for a down payment and the loan's closing costs.  

Assets can be in many forms, but the most common are bank accounts (both savings and checking), stock accounts, and retirement accounts.  One key thing to know is what funds are considered "liquid".  Liquid funds are funds that can be accessed quickly and easily with no penalty or delay.  Generally, all checking and savings accounts are considered liquid funds, and if any cash or retirement accounts have cash options, those can be considered liquid as well.

Now if funds are not liquid and they are held in a stock or retirement account, the lender will take a haircut on those available funds to protect their interests.  Usually, that haircut is 70%, so if you show $10,000 in a retirement account, the lender will consider that as $7,000 in available funds.  So if you are looking to show a lender as much in assets as possible, it's smart to make everything liquid ahead of time so that no haircut is applied.

One thing to note also about assets is any large deposit and routine withdrawal.  Any large deposits made on the asset statements submitted have to be sourced.  This does not include being paid by your employer, however.  And any large funds are considered to be 50% or more of your household's monthly income.  So if your household makes $10,000 per month, any deposits of $5,000 or greater into an account you are using have to be sourced.  That's why, if you are receiving funds from a friend or relative, have them send it to you at least 2 months in advance, or have them send it to escrow as gift funds.  Escrow would then apply those funds to your down payment and closing costs.  Also, if you have any routine withdrawals, the lender will make note of this and may inquire about them, especially if it looks like you are paying someone else, which they have to make sure is not something court-ordered, such as alimony or child support.

If you can just use common sense and follow what I've said above, you can avoid a lot of unnecessary conditions in regard to your mortgage loan.  If not, you could end up having to provide your broker/lender a lot of documentation, which could lead to having to reach out to your bank or financial institution, which as we all know is never fun.