Assets are an important part of every mortgage, including a military home loan, also known as a VA loan. Cash assets may be needed for the down payment or closing costs. Some are necessary to fulfill any reserve requirement that may be mandated by the loan. Whatever the reason, seasoning assets for a military home loan is essential.
What are assets?
Assets are the funds needed for a down payment, closing costs, prepaids or reserves. They can be in the form of savings accounts, checking accounts, money market accounts, investment portfolios, IRAs, CDs or retirement accounts.
Assets gives the VA lender a true look at a borrower’s financial profile. They reflect a borrower’s ability to save and budget over a period of time. Also important, is the source of assets. Continuous savings from regular paychecks is looked at differently than a one time gift or sale of a valuable item.
When examining a VA loan file, assets are just as important as credit. Having a healthy savings account shows the fiscal strength of the borrower.
What are seasoned assets?
In order to make sure that the borrower is not depositing money into their account just to satisfy the mortgage terms, lenders require that assets be seasoned. This means that the funds must be in the borrower’s account for a certain period of time. Usually seasoning requires 60 days, however, each lender can have different rules.
Funds needed for the mortgage will also be sourced which means that the VA lender will check to see where the money came from. If the funds are in the savings account for at least two months or more, sourcing is already completed through copies of the bank statements.
Why must assets be seasoned and sourced?
Assets must be seasoned and sourced in order to verify that funds actually belong to the borrower and were obtained from an acceptable and legal source. Gifts from family members are common and acceptable with VA loans as long as gift rules are followed. Since mortgage transactions fall under federal banking laws, the government must ensure that no money laundering is taking place. Someone who makes any kind of down payment in a mortgage transaction might try to use illegally obtained money to do so. Then if the property is later sold or refinanced where cash is given back, that money has in essence been laundered.
The best way to handle assets is to leave them alone. Shuffling assets from one account to another will only cause confusion for the lender which will result in questions for the borrower. In the event that funds must be moved for the VA home purchase, it is a good idea to do movement several months in advance of submitting a mortgage application. By doing so, the transfer and moving of funds will not show up on the most recent two months of bank statements that are given to the lender for the loan file.
Everything in a VA loan file will be examined very closely for anything that may be considered a red flag. Large deposits outside of your normal banking habits will raise questions. Deposits that cannot be sourced will be questioned. The easiest way to season assets when applying for a military home loan is to have them in place several months before submitting your application. Allow them to sit in the bank account for a period of time so that the verification of deposit done by the lender or the bank statements submitted shows a steady average balance. In other words, your bank accounts are stable.
Need assistance filling out a VA loan application? Feel free at any time to contact me for more information about a VA loan and how you can achieve a 100% VA home purchase.
My loan process was very easy and quick. Not to mention a great loan rate. I couldn't be happier!
Capt Sam T. - US Army
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