Mortgage application: Disclosing All Assets?

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delamer
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Mortgage application: Disclosing All Assets?

Post by delamer » Mon Sep 24, 2018 10:51 am

My husband and I expect to be applying for a mortgage for a 2nd/retirement home within the next few months.

Here are the major income and assets that we have (parentheses show number of sources/accounts between us):

W-2 salary (1)
Monthly pension (1)
IRAs (3)
401(k) plans (2)
Taxable portfolio (1)

We’ve checked out a couple affordability calculators and know that our income plus the taxable account will be more than sufficient to qualify us for the mortgage. The money for the downpayment will be coming from the taxable account.

We have not begun any withdrawals from the tax-deferred accounts. However, someone reviewing my husband’s pay stub could tell that he is contributing to a 401(k) plan.

Our preference would be only to disclose the salary, pension, and taxable account on our mortgage application. With identity fraud, aggressive marketing of banking services, and general privacy concerns, we figure the less information floating around about our financial status, the better.

The question is whether we’d be committing any type of fraud by not disclosing the IRAs and 401(k)s on the application?

Obviously, we’d report our couple liabilities. We aren’t trying to hide any negatives, just not reveal some assets.

Goal33
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Re: Mortgage application: Disclosing All Assets?

Post by Goal33 » Mon Sep 24, 2018 10:56 am

It'll be fine as long as you have enough in taxable to qualify for all incentives / rate reductions. I.e. 12 months reserve, or things like this.

You can just ask your mortgage broker if there would be any incentive to show additional assets. They want this process as streamlined as possible too.
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afan
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Re: Mortgage application: Disclosing All Assets?

Post by afan » Mon Sep 24, 2018 11:00 am

The last few times we got a mortgage we did exactly this. Show plenty of income and assets to cover the mortgage, all our negligible debts and not report any extra assets. At least the last time we told them we were doing this. They did not care.

I suspect if you were to default they may not be able to go after the retirement accounts anyway. If it came to that, they would look up all your assets. I don't know how this is done but it seems to be routine when going after debtors. Your credit report should also show your debts so that may be a check on people who try to hide some.

Just make sure you show enough to get the best interest rate.
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barnaclebob
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Re: Mortgage application: Disclosing All Assets?

Post by barnaclebob » Mon Sep 24, 2018 11:05 am

I think when we applied for our last loans to buy our current house, a traditional mortgage and a 2nd mortgage/heloc to cover the gap before we sold our first house, we disclosed all assets. But the loan officer mentioned something about having plenty of assets and she didn't even need to submit them all to the system. However It was probably good that we did submit everything because the sellers agent called her to verify our pre approval letter and she was truthfully able to say we were as good as gold.

adamthesmythe
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Re: Mortgage application: Disclosing All Assets?

Post by adamthesmythe » Mon Sep 24, 2018 12:55 pm

What I hear is that the bank cares far more what your income is than what your assets are. To the point that applying for a mortgage with lots of assets but no income does not work.

I do not believe that you are obliged to list all assets, only that your reported numbers are valid. (You might want to look at the wording above your signature line).

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Meg77
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Re: Mortgage application: Disclosing All Assets?

Post by Meg77 » Mon Sep 24, 2018 1:14 pm

Banker here. Technically you're pledging that you are disclosing all income and assets on a URLA mortgage application when you sign at the bottom, but in practice many people leave off some assets (and even debts, which we later discover on the credit reports). Leaving off some retirement assets isn't going to get you in trouble for mortgage fraud. But you don't have to put account numbers or even what brokerage firm they are at if you don't want to, so I'm not sure what kind of privacy or fraud concerns you are worried about.

I would encourage you to list them, especially if you taxable balances are under 6 figures or total up to less than 12 months of the mortgage payments you are seeking. Different mortgage products come with all kinds of calculations and rules that most people never see that can impact your interest rate or ability to get that specific product that might be a bit better. Often retirement assets can be used as a mitigant if some other ratio is off or close; they can also be cited as a source of liquidity when needed to get a better loan (for example some loan products require that you have 12 months of mortgage payments in "liquidity" - and sometimes retirement accounts can be deemed liquid if you are of retirement age and/or if the retirement balances are 3x - or some other variable - or the amount of liquidity otherwise required). You'll still qualify for A loan presumably, but there are dozens of different 30 years mortgages a mortgage provider can choose from that may have different custodians, different internal underwriting standards, and slightly different rates and fees and down payment requirements.

What you can leave off are the value of personal assets like art, jewelry, guns, etc. Also the estimated value of privately owned businesses or private equity interests and paid off automobiles, boats, and other toys like aircraft. People go to great lengths to detail the value of those items, and they are categorically ignored for mortgage underwriting purposes.
"An investment in knowledge pays the best interest." - Benjamin Franklin

annielouise
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Re: Mortgage application: Disclosing All Assets?

Post by annielouise » Mon Sep 24, 2018 1:19 pm

We were asked about accounts we didn't list on our application in 2015. They found them.

delamer
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Re: Mortgage application: Disclosing All Assets?

Post by delamer » Mon Sep 24, 2018 1:54 pm

Meg77 wrote:
Mon Sep 24, 2018 1:14 pm
Banker here. Technically you're pledging that you are disclosing all income and assets on a URLA mortgage application when you sign at the bottom, but in practice many people leave off some assets (and even debts, which we later discover on the credit reports). Leaving off some retirement assets isn't going to get you in trouble for mortgage fraud. But you don't have to put account numbers or even what brokerage firm they are at if you don't want to, so I'm not sure what kind of privacy or fraud concerns you are worried about.

I would encourage you to list them, especially if you taxable balances are under 6 figures or total up to less than 12 months of the mortgage payments you are seeking. Different mortgage products come with all kinds of calculations and rules that most people never see that can impact your interest rate or ability to get that specific product that might be a bit better. Often retirement assets can be used as a mitigant if some other ratio is off or close; they can also be cited as a source of liquidity when needed to get a better loan (for example some loan products require that you have 12 months of mortgage payments in "liquidity" - and sometimes retirement accounts can be deemed liquid if you are of retirement age and/or if the retirement balances are 3x - or some other variable - or the amount of liquidity otherwise required). You'll still qualify for A loan presumably, but there are dozens of different 30 years mortgages a mortgage provider can choose from that may have different custodians, different internal underwriting standards, and slightly different rates and fees and down payment requirements.

What you can leave off are the value of personal assets like art, jewelry, guns, etc. Also the estimated value of privately owned businesses or private equity interests and paid off automobiles, boats, and other toys like aircraft. People go to great lengths to detail the value of those items, and they are categorically ignored for mortgage underwriting purposes.
Thanks for this; I remembered that there was a frequent Boglehead poster who is a banker, so I was hoping to hear from you. 😊

For more background, this will be a perm-to-construction loan. We will probably use a bank that has worked with the builder previously rather than one with whom we have a pre-existing relationship.

My guess is that the more assets we show, the more likely we will get pitched to open new accounts or move investments. Also, wouldn’t we have to document any assets that we report with a statement? I assume we could redact account numbers, but still...

Regarding the taxable account, we could buy 2+ of the houses outright with the current balance. It is over 6 figures. And we each have outstanding credit.

That is interesting about the personal assets. I don’t think we’ve ever put them on an application.

delamer
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Re: Mortgage application: Disclosing All Assets?

Post by delamer » Mon Sep 24, 2018 1:55 pm

annielouise wrote:
Mon Sep 24, 2018 1:19 pm
We were asked about accounts we didn't list on our application in 2015. They found them.
Tax-deferred accounts from which you were not taking withdrawals?

Church Lady
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Re: Mortgage application: Disclosing All Assets?

Post by Church Lady » Mon Sep 24, 2018 2:03 pm

When I applied for my mortgage over the phone, I started listing my accounts. Soon after I started, the agent said "That's enough" and didn't want to hear about the rest. If the mortgage company found out about the remaining accounts, they said nothing. I got the loan.

The mortgage company is a top nationwide bank, not some obscure lender.

Just saying!
He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity. Ecclesiastes 1:8

mortfree
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Re: Mortgage application: Disclosing All Assets?

Post by mortfree » Mon Sep 24, 2018 2:20 pm

Novice here.

I usually only reported my “cash” accounts.

I left off the taxable investing accounts.

Why? Because they always want the bank statement and I didn’t feel like getting them for each and every account. My cash holdings were sufficient as far as I was concerned. The lender never asked for additional info.

michaeljc70
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Re: Mortgage application: Disclosing All Assets?

Post by michaeljc70 » Mon Sep 24, 2018 4:22 pm

I don't know that I would be worried about giving more information given you are already probably turning over SSNs, tax returns, pay stubs, etc.

I know in the past the mortgage person didn't list all my assets and when I pointed it out they said it wasn't necessary for the mortgage.

annielouise
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Re: Mortgage application: Disclosing All Assets?

Post by annielouise » Mon Sep 24, 2018 5:24 pm

delamer wrote:
Mon Sep 24, 2018 1:55 pm
annielouise wrote:
Mon Sep 24, 2018 1:19 pm
We were asked about accounts we didn't list on our application in 2015. They found them.
Tax-deferred accounts from which you were not taking withdrawals?
My memory isn't that good. I just remember being surprised that they asked about accounts we had either forgotten / decided not to include. In one account it was my in-laws money because we paid their bills.

delamer
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Re: Mortgage application: Disclosing All Assets?

Post by delamer » Mon Sep 24, 2018 6:21 pm

annielouise wrote:
Mon Sep 24, 2018 5:24 pm
delamer wrote:
Mon Sep 24, 2018 1:55 pm
annielouise wrote:
Mon Sep 24, 2018 1:19 pm
We were asked about accounts we didn't list on our application in 2015. They found them.
Tax-deferred accounts from which you were not taking withdrawals?
My memory isn't that good. I just remember being surprised that they asked about accounts we had either forgotten / decided not to include. In one account it was my in-laws money because we paid their bills.
Thanks.

I can’t see how a credit check or other documentation would turn up a tax-deferred account that you aren’t contributing to or were not reporting withdrawals from on your tax return.

JGoneRiding
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Re: Mortgage application: Disclosing All Assets?

Post by JGoneRiding » Mon Sep 24, 2018 11:17 pm

I found in the last 3 Loans that i did NOT need to provide proof/statements for all accou ts, and I probably forgot a few and they didn't care. I have 2 many accounts from Playing 2 many interest rate change games. They only wanted statements for the large ones. Luke my brokerage, retirement and every day checking.

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Meg77
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Re: Mortgage application: Disclosing All Assets?

Post by Meg77 » Tue Sep 25, 2018 2:53 pm

delamer wrote:
Mon Sep 24, 2018 1:54 pm
Meg77 wrote:
Mon Sep 24, 2018 1:14 pm
Banker here. Technically you're pledging that you are disclosing all income and assets on a URLA mortgage application when you sign at the bottom, but in practice many people leave off some assets (and even debts, which we later discover on the credit reports). Leaving off some retirement assets isn't going to get you in trouble for mortgage fraud. But you don't have to put account numbers or even what brokerage firm they are at if you don't want to, so I'm not sure what kind of privacy or fraud concerns you are worried about.

I would encourage you to list them, especially if you taxable balances are under 6 figures or total up to less than 12 months of the mortgage payments you are seeking. Different mortgage products come with all kinds of calculations and rules that most people never see that can impact your interest rate or ability to get that specific product that might be a bit better. Often retirement assets can be used as a mitigant if some other ratio is off or close; they can also be cited as a source of liquidity when needed to get a better loan (for example some loan products require that you have 12 months of mortgage payments in "liquidity" - and sometimes retirement accounts can be deemed liquid if you are of retirement age and/or if the retirement balances are 3x - or some other variable - or the amount of liquidity otherwise required). You'll still qualify for A loan presumably, but there are dozens of different 30 years mortgages a mortgage provider can choose from that may have different custodians, different internal underwriting standards, and slightly different rates and fees and down payment requirements.

What you can leave off are the value of personal assets like art, jewelry, guns, etc. Also the estimated value of privately owned businesses or private equity interests and paid off automobiles, boats, and other toys like aircraft. People go to great lengths to detail the value of those items, and they are categorically ignored for mortgage underwriting purposes.
Thanks for this; I remembered that there was a frequent Boglehead poster who is a banker, so I was hoping to hear from you. 😊

For more background, this will be a perm-to-construction loan. We will probably use a bank that has worked with the builder previously rather than one with whom we have a pre-existing relationship.

My guess is that the more assets we show, the more likely we will get pitched to open new accounts or move investments. Also, wouldn’t we have to document any assets that we report with a statement? I assume we could redact account numbers, but still...

Regarding the taxable account, we could buy 2+ of the houses outright with the current balance. It is over 6 figures. And we each have outstanding credit.

That is interesting about the personal assets. I don’t think we’ve ever put them on an application.
If you're getting a construction loan (even a construction to perm) then that's a different type of mortgage altogether. It won't be sold to a third party; it'll be underwritten and serviced by the bank you choose. That's what I do actually - I'm a "private banker" meaning that we work with affluent clients, but also that the loans we originate are held on our books and serviced by us. Most of them are real estate related (a chunk of which are construction), and others are yachts, aircraft, investment lines, and other misc investment loans.

For these applications - those to credit unions or private banks which plan to hold the mortgage instead of sell it - it can be even more important to list all your assets because net worth actually can matter (whereas it doesn't with traditional conventional mortgages). Conversely, credit score doesn't matter as much and wont' likely impact your rate. Some banks have net worth minimums or loan amount minimums and/or liquidity minimums. Either way, the higher the net worth, the more concessions you may be offered and the more attention your needs will get. You may also be more likely to be assigned a more experienced banker, unless you already picked the person you're working with.

That may also mean a sales pitch or an extra invitation to lunch from the banker, but of course you can always decline (or just accept - many bankers have to go on X number of in person calls a month, so they are happy to take you out usually even if they know you have no intention of moving business over; plus it's free lunch for them too after all!). And retirement assets, especially if you are still working, aren't usually considered transportable, so it would be the rare very hungry banker who will try to go after those specifically. Besides, most bankers - especially those facilitating construction loans - are paid to lend money and raise deposits. They might get a referral bonus or an extra pat on the back for referring a client in need to one of the investment representatives, but getting investments isn't their primary goal or role - getting new loans is.

Oh and as for documentation, most banks only ask for statements supporting liquidity, or cash. You'll need to show you have the equity requirement (which your taxable account should suffice), but not much more. Even conventional lenders don't usually ask for retirement statements unless they need that extra $ to be verified. But in general it sounds like you'll be fine and have little problem getting approved either way!

Good luck. :)
"An investment in knowledge pays the best interest." - Benjamin Franklin

delamer
Posts: 6138
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Re: Mortgage application: Disclosing All Assets?

Post by delamer » Tue Sep 25, 2018 3:32 pm

Meg77 wrote:
Tue Sep 25, 2018 2:53 pm
delamer wrote:
Mon Sep 24, 2018 1:54 pm
Meg77 wrote:
Mon Sep 24, 2018 1:14 pm
Banker here. Technically you're pledging that you are disclosing all income and assets on a URLA mortgage application when you sign at the bottom, but in practice many people leave off some assets (and even debts, which we later discover on the credit reports). Leaving off some retirement assets isn't going to get you in trouble for mortgage fraud. But you don't have to put account numbers or even what brokerage firm they are at if you don't want to, so I'm not sure what kind of privacy or fraud concerns you are worried about.

I would encourage you to list them, especially if you taxable balances are under 6 figures or total up to less than 12 months of the mortgage payments you are seeking. Different mortgage products come with all kinds of calculations and rules that most people never see that can impact your interest rate or ability to get that specific product that might be a bit better. Often retirement assets can be used as a mitigant if some other ratio is off or close; they can also be cited as a source of liquidity when needed to get a better loan (for example some loan products require that you have 12 months of mortgage payments in "liquidity" - and sometimes retirement accounts can be deemed liquid if you are of retirement age and/or if the retirement balances are 3x - or some other variable - or the amount of liquidity otherwise required). You'll still qualify for A loan presumably, but there are dozens of different 30 years mortgages a mortgage provider can choose from that may have different custodians, different internal underwriting standards, and slightly different rates and fees and down payment requirements.

What you can leave off are the value of personal assets like art, jewelry, guns, etc. Also the estimated value of privately owned businesses or private equity interests and paid off automobiles, boats, and other toys like aircraft. People go to great lengths to detail the value of those items, and they are categorically ignored for mortgage underwriting purposes.
Thanks for this; I remembered that there was a frequent Boglehead poster who is a banker, so I was hoping to hear from you. 😊

For more background, this will be a perm-to-construction loan. We will probably use a bank that has worked with the builder previously rather than one with whom we have a pre-existing relationship.

My guess is that the more assets we show, the more likely we will get pitched to open new accounts or move investments. Also, wouldn’t we have to document any assets that we report with a statement? I assume we could redact account numbers, but still...

Regarding the taxable account, we could buy 2+ of the houses outright with the current balance. It is over 6 figures. And we each have outstanding credit.

That is interesting about the personal assets. I don’t think we’ve ever put them on an application.
If you're getting a construction loan (even a construction to perm) then that's a different type of mortgage altogether. It won't be sold to a third party; it'll be underwritten and serviced by the bank you choose. That's what I do actually - I'm a "private banker" meaning that we work with affluent clients, but also that the loans we originate are held on our books and serviced by us. Most of them are real estate related (a chunk of which are construction), and others are yachts, aircraft, investment lines, and other misc investment loans.

For these applications - those to credit unions or private banks which plan to hold the mortgage instead of sell it - it can be even more important to list all your assets because net worth actually can matter (whereas it doesn't with traditional conventional mortgages). Conversely, credit score doesn't matter as much and wont' likely impact your rate. Some banks have net worth minimums or loan amount minimums and/or liquidity minimums. Either way, the higher the net worth, the more concessions you may be offered and the more attention your needs will get. You may also be more likely to be assigned a more experienced banker, unless you already picked the person you're working with.

That may also mean a sales pitch or an extra invitation to lunch from the banker, but of course you can always decline (or just accept - many bankers have to go on X number of in person calls a month, so they are happy to take you out usually even if they know you have no intention of moving business over; plus it's free lunch for them too after all!). And retirement assets, especially if you are still working, aren't usually considered transportable, so it would be the rare very hungry banker who will try to go after those specifically. Besides, most bankers - especially those facilitating construction loans - are paid to lend money and raise deposits. They might get a referral bonus or an extra pat on the back for referring a client in need to one of the investment representatives, but getting investments isn't their primary goal or role - getting new loans is.

Oh and as for documentation, most banks only ask for statements supporting liquidity, or cash. You'll need to show you have the equity requirement (which your taxable account should suffice), but not much more. Even conventional lenders don't usually ask for retirement statements unless they need that extra $ to be verified. But in general it sounds like you'll be fine and have little problem getting approved either way!

Good luck. :)
Thanks for all the additional information.

I may be back on the thread once we have more details on loan terms.

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