For the average borrower, pay stubs, tax returns, and bank statements are documents used to prove traditional income when applying for a mortgage. But for a certain segment of the population, these documents either don’t represent their true financial position or they aren’t available at all. When that’s the case, qualifying for a mortgage loan gets a little sticky.
However, there are alternatives to conforming ARM and fixed-rate mortgages that serve clients who can afford the home price but don’t have the conventional documentation to prove it. It isn’t for every borrower so when does it make sense to pursue an asset utilization mortgage?
Why asset utilization can work
Reasons for choosing this type of loan product are varied but applicants will all have something in common: income that can’t be verified in the traditional methods that your typical mortgage lender looks for. They may not receive W-2s for working, potentially because they’re a C-suite executive or they’re a private investor. Pay stubs and tax returns just don’t exist like the average 9-to-5 employee.
Asset Utilization sidesteps the requirement to have active income to qualify for a home loan. Instead, it captures a financial snapshot based on the applicant’s assets. If you have substantial amounts of easily liquidated assets or cash accounts, the mortgage may be approved based on a predetermined asset utilization ratio.
For these types of borrowers, the risk assessment to the mortgage lender is extremely low since the monthly mortgage payment is a tiny portion of the assets on hand. And for borrowers, there’s good potential to earn a higher return on assets, so the loan amount is paid down with little effect on their holdings.
Who can benefit from an asset utilization mortgage?
Essentially, anyone with non-traditional income and high asset values can use this type of loan as long as they meet credit score and LTV criteria. Here are a few of the customer profiles you might see with an asset utilization mortgage.
Without W-2s or pay stubs that prove consistent income but with company stocks or large cash dividends in the bank, business owners can get approved for a non-traditional mortgage like an asset utilization loan. The same principle applies for highly commission-based earners.
Individuals with inherited wealth
For those who have inherited a large sum, it can seem imprudent to spend a huge chunk on buying a home. However, an asset utilization mortgage allows them to hold much of their inheritance and leverage it in ways that earn money instead.
It might seem wildly volatile to some, but cryptocurrency investors and miners can sometimes be seen as an asset to qualify for a mortgage. Since it isn’t widely accepted, crypto assets are often restricted to Bitcoin but other coins might be added soon.
Find out how you benefit from an Asset Utilization Mortgage
Does this type of product resonate with you? Rather than locking your assets into a real estate purchase or settling for a smaller mortgage than you deserve, see how you can use assets to get approved for your dream home. Contact MBANC to find out how we can serve you.