Quite often, first time home buyers share their savings accounts or money market accounts with their parents. Even if the name of the potential home buyer is on the statement, it does not necessarily mean that he or she has full access to or possession of the account. The lender will split the asset between the home buyer and the parent who shares the account. So, if there is $12,000 in the account, the lender will only account credit for $6,000 of that. A quick fix is to have the parent write a note stating that the account will be turned over to the potential home buyer. Any assets that are listed must be in full possession of the home buyer.

Another concern is that some home buyers do not pay attention to how liquid their assets are. This means that even though an account is present, such as a retirement account, the home buyer may not have access to it. A retirement account will have no value until one is retired. For the purpose of financing, the home buyer may cash that account. Another option is to allow the lender to use a partial amount that can be included in the assets.

Although some types of accounts will let the owner cash in, it is for a penalty. For example, the home buyer has $50,000 in his or her retirement account and wishes to cash in. The lender will consider the penalty of this action; let’s say, 10%, and deduct that from the account. So in actuality, the account is only worth $45,000. It is suggested that the home buyer talk to a financial planner about this decision. If the home buyer does not decide to cash in their account then that asset can still be used to qualify them for a home loan. The lender will most likely use 70% of the home buyer’s vested balance. The vested balance is the portion of the 401k that one is currently entitled to.

The very last asset requirement for loans is called reserves. The reserves are the funds that are there when the home buyer closes his or her purchase. It is usually in multiples of the house payment. Retirement accounts by itself can be used as reserve assets.