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Asset Verification: What Assets are Verified
April 2, 2024

When applying for a mortgage, lenders want to make sure you can afford the loan. One way they do this is through asset verification. This process involves checking your financial holdings to confirm your ability to repay the loan. But what exactly do lenders look at? This blog explores the different types of assets that are typically verified during the mortgage approval process.

Asset Verification: Understanding Verified Assets

Let's understand  the most common asset categories that lenders examine during asset verification. These include bank accounts, investment accounts, and real estate holdings. We'll discuss what information lenders typically verify for each category.

What information is verified in savings accounts during asset verification?

Savings accounts, the cornerstone of personal finance, undergo meticulous scrutiny during asset verification. Lenders delve into several key aspects:

  1. Account Ownership and Holder Validation:  Verification entails confirming the ownership of savings accounts and aligning the account holder's details with borrower information.
  1. Account Balance Assessment:  The current balance serves as a crucial indicator of financial stability, influencing decisions regarding down payments and closing costs.
  1. Transaction Analysis: Lenders meticulously review transaction histories, scrutinizing large deposits or withdrawals for their impact on financial stability.
  1. Source of Funds Scrutiny: Any recent deposits undergo scrutiny to ensure their legitimacy, often necessitating documentation for substantial sums.
  1. Consistency and Stability Evaluation: Stability in account balances over time is favored, reflecting disciplined financial management.
  1. Submission of Account Statements: Borrowers are typically required to furnish recent statements, providing insights into account activity and financial health.

 

What details are checked in investment accounts during asset verification?

Investment accounts, vehicles for wealth accumulation, undergo thorough examination during asset verification. Auditors focus on critical details such as:

  1. Ownership and Beneficial Ownership Confirmation: Verification extends to ensuring that investment accounts are owned by the entity or individual under assessment.
  1. Existence and Completeness Validation: Auditors verify the existence of investment accounts, ensuring comprehensive inclusion in financial records.
  1. Valuation and Classification Alignment: The valuation of investments must align with market values or appropriate methodologies, with clear classification into current or long-term investments.
  1. Internal Control Evaluation: Assessment of internal controls encompasses authorization procedures, safeguarding measures, title ownership, and information management protocols.
  1. Verification Procedures Implementation: Auditors employ diverse verification procedures, including transaction verification, physical inspections, valuation reviews, and data analysis.

 

How are retirement accounts assessed in asset verification?

Retirement accounts, epitomes of long-term financial planning, undergo meticulous assessment during asset verification, especially in mortgage lending scenarios. Key evaluation points include:

  1. Types of Retirement Accounts: Various retirement accounts such as 401(k)s, IRAs, and 403(b)s are assessed, each with distinct rules and tax implications.
  1. Verification Process Overview: Verification encompasses account ownership, balance assessment, scrutiny of recent statements, transaction analysis, and consideration of tax implications.
  1. Tax Benefits and Penalties Analysis: Thorough evaluation includes assessing tax-deferred status, potential penalties for early withdrawals, and implications of loan availability.
  1. Asset Allocation Examination: The composition of investments within retirement accounts is scrutinized, balancing risk and return considerations.
  1. Pension Fund Managers Influence: In systems like the National Pension System, subscribers' choice of pension fund managers and asset allocation strategies play a significant role in assessment.

 

What is verified regarding real estate holdings in asset verification?

Real estate holdings, substantial assets in financial portfolios, undergo meticulous verification to ensure transparency and compliance. Verification entails:

  1. Title Deeds and Ownership Documentation Review: The validation process commences with verifying title deeds and ownership documents to confirm legal control over the property.
  1. Physical Inspection:  Auditors conduct physical inspections to verify the existence of the property and ensure alignment with documented descriptions.
  1. Asset Valuation: The fair market value of real estate holdings is determined through appraisals or market valuations.
  1. Ownership Structure Examination: Evaluation extends to examining ownership structures, including the involvement of special purpose vehicles or holding companies.
  1. Legal Compliance Assessment: Compliance with zoning laws, building codes, and land use regulations is crucial, alongside investigations into legal disputes or encumbrances.
  1. Income and Expense Analysis: Reviewing income generated and expenses incurred provides insights into the financial performance and viability of real estate assets.
  1. Environmental Considerations: Assessments are conducted to identify potential environmental hazards or compliance issues, ensuring adherence to regulations.

Summary:

Asset verification ensures accurate financial dealings for everything you own, from bank accounts to property. Strict procedures promote informed decisions and healthy financial practices.