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Refinance & Mortgage Tips: Down Payment From Stocks & Bonds
By: Tristan Hunt iSnare Expert Author
When you start thinking about buying a home, the first thing you should be
considering is your down payment and cash for fees and closing costs, and then
you’ll have to show your lender how where you got the money for the down
payment. The best place to start the process is by documenting and verifying the
contents of your checking, savings and money market accounts at your bank. But
for those of you who have most of your money invested outside of your checking
and savings, you may wish to look to your brokerage account and its contents:
stocks, bonds, mutual funds etc., to show your lender the money. Still in many
cases it may not be advisable to liquidate well performing investments to make a
down payment.
If you have a brokerage account in good standing, documenting these assets is
simple. Open up your filing cabinet and find the most recent statement of your
account. Your lender will likely require that you need a current (thirty to
ninety day old) brokerage account statement for documentation of the assets.
If you own shares in a mutual fund or any stocks or bonds which were purchased
outside of the brokerage account, please produce hard copies of any proof of
ownership and submit copies to your lender clearly explaining the situation. For
example, if you have 1,000 physical stock certificates of Berkshire Hathaway A
gathering dust in a safety deposit box or fireproof safe somewhere, you’ll want
to take photocopies of the certificates and if necessary get a letter from the
company’s registrar confirming your ownership of n number of shares of the
company in your name. The same is true of all instruments which you may have
physical copies of, but it is important to note that shares of private companies
will not benefit you in verifying your assets for the lender. Mutual funds often
provide separate statements which you can produce for your lender’s
satisfaction. Be sure to present statements which are no more than 30 days old.
So everything we’ve talked about so far refers to the verification of assets,
but if you are planning on selling all or part of these stocks, bonds, mutual
funds or any other securities to make a down payment or pay for fees and closing
costs on your new home and mortgage respectively, it is critical to keep every
single piece of paper, email, bank to bank wire / telex, or other communication
which documents the sale or other liquidation of the assets and any receipts
which show how you got paid for raising money against or through these assets.
Be thorough, be detailed, because most lenders will be obligated to ask you a
lot of questions about the liquidation of such assets to cover a down payment on
your new home or closing costs on your mortgage.
If you deposit funds from the sale of securities, including stocks, bonds and
mutual funds into a savings, checking or money market account, try to put the
money in the same bank where you are keeping most of your accounts, which will
simplify matters and make it easier to substantiate the sudden influx of cash
from the sale. And hang on to those receipts!
Stocks, bonds and mutual funds are an excellent source of capital for the
purposes of establishing that you have reserves of assets which could be used in
emergency situations such as unemployment, disaster or injury, however it is
difficult to recommend liquidating these assets for use in marginally reducing
your rate of borrowing on a home loan. Generally, it is best to discuss the
matter with your financial advisor to weigh the comparative performance offset
between the appreciation of these investments against whatever savings you might
realize by liquidating them for use as a down payment. About the Author:
Tristan Hunt is a seasoned financial professional with a wealth of experience
in the mortgage industry, advising clients on
debt consolidation, refinancing &
investor loans. |
