Real estate commission

If the buyer is a real estate agent, he or she may want to use his or her share of the real estate commission to satisfy asset requirements. The acceptability of future funds varies from lender to lender, and program to program. Some lenders allow the agent to use the projected commission to cover projected closing costs, as well as satisfy asset requirements. Other lenders and programs will not

Stocks, bonds and money market funds

Investments in securities—such as stocks, bonds and money market funds—are acceptable liquid assets. Some institutions allow the applicant to borrow against market value of their investments. In such cases, these margin loan funds are treated as secured loans. If the applicant will be liquidating investment funds, the following processing tasks are normally required:
1. Most recent statements. The processor should provide copies of the most recent asset statements for the investments.
2. Liquidation check. Investment liquidations are normally remitted to the individual investor with a check. The applicant should make a copy of this check before depositing it and submit it to the lender with any accompanying summary statements.
3. Deposit receipt. The applicant should immediately deposit the liquidation check and provide the lender with a copy of the deposit receipt.

Life insurance policies

The cash value of a whole life insurance policy is an acceptable liquid asset. Most loan applicants are allowed to borrow against this cash value, and those funds are treated as secured loans. If the loan applicant were to default on that secured loan from the insurance company, the insurer/creditor can deduct the past due balance from the life insurance policy’s cash value.
The loan proceeds from this insurance policy have similar processing requirements as secured loans.

Sale of assets

Proceeds from the sale of the borrower’s personal or real property are acceptable liquid assets, as in the case of current homeowners who are selling their current properties and purchasing a new home.
The main challenge is to document the source of funds to be used for closing. For example, it is acceptable for the applicant to sell a car or jewelry to gather cash for the closing. However, the applicant must provide documentation of the sale and the borrower’s receipt of funds. If real estate is being sold to generate cash, the seller will normally receive a certified HUD-1 settlement statement from the closing agent. This statement is the typical documentation requirement.

The sale of other possessions—such as jewelry, electronic equipment, luxury items and cars—require more documentation:

Bill of sale. A signed bill of sale identifies the details of the sale.
Copy of payment check. The loan applicant selling the item should only accept a check payment, preferably a money order or cashier’s check. The applicant should then make a copy of the check before depositing it.
Deposit receipt. To properly document qualifying cash assets, the applicant must deposit the sales proceeds and provide to the lender a copy of that bank deposit receipt.
Automobiles. If the asset being sold is a car, the applicant must also explain why that car is no longer necessary.