You are ready to start looking for your dream home, but that doesn’t mean that your income level is. For many first home buyers, things such as home loans can be quite overwhelming, especially for those on a lower income. If you expect to encounter issues proving your income is substantial enough to get the home you want and you have a high level of assets, a high asset home loan could be the perfect solution to your problem. What should you know about this unique type of home loan and who it’s a good fit for?
Who Is a High Asset Home Loan Right For?
This type of home loan is typically right for:
- Individuals who have irregular or unsteady income (especially common with self-employed people or entrepreneurs)
- Freelancers or consultants
- Contractors or 1099 employees
- Individuals with many income streams
- Individuals with a high net worth, but without much verifiable or steady income
What Assets Can Be Taken Into Account?
The assets that are included in calculations for a high asset home loan cannot be counted dually. What that means is that any assets you provide to prove your income and reserves can’t be double-counted when calculating your additional qualifying income. Assets that could be included in calculating your loan eligibility include:
- Checking or savings accounts
- CDs and Money Market accounts
- IRA and/or 401(k) accounts, if fully vested
What Can You Expect?
While high asset home loans are not totally uncommon, you should expect the application process to be more rigorous than it would be for a typical home loan. The formula used to calculate your eligibility assesses 70% of any qualifying assets, takes out what you would need for a down payment and closing costs and then divides the remainder by 360 (representing the number of months in an average home loan). This will give the lender an average monthly income that can be used to determine the maximum payment amount and maximum loan amount.
What does this look like in reality? Let’s say you have $1,000,000 in assets. The lender would count $700,000 of that. Once $10,000 of closing costs are taken out and the number is divided by 360, the lender will assess that the buyer has $1,917 in monthly income.
Partner with Equity Mortgage for a High Asset Home Loan
We are experienced in getting homeowners the best possible mortgage product for their situation, whether you have traditional fixed income or get paid inconsistently throughout the year. Since every client is in a different situation, we encourage you to get in touch and learn how we can help. Contact us today by calling 443-471-4310. We look forward to hearing from you!