Documentation of sufficient funds to cover closing costs, down payment, prepaids and reserve requirements is generally required by the lender.
Typically, conforming lenders require at least 2 months worth of PITI (Principal + Interest + Taxes + Insurance ) for purchases of primary and second home residences. Investment properties usually require 6 months PITI reserves.
For Refinance transactions, lenders typically do not require PITI reserves. However, the availability of assets will strengthen the loan and reduce a layer of risk.
Non-conforming and Sub-prime products are subject to different asset and reserve guidelines specific to each individual program.
Assets are divided into 2 categories:
Liquid Assets: Checking / Savings and Money Market accounts
Non-liquid Assets: Stocks, Individual Retirement Account (IRA's), 401K's, Certificate of Deposits (CD's) and Bonds.
Personal property, including, but not limited to, automobiles, jewelry, furniture, etc. cannot be used for the basis of qualification. However, if the borrower can document the sale of said items with a sufficient "paper trail", the received funds will generally be allowed.
