When applying for a mortgage or a major loan, lenders require a Verification of Assets (VOA) to confirm that you have the funds you claim for the down payment, closing costs, and reserves needed. This verification helps lenders reduce lending risk by ensuring the money is truly yours and sourced legitimately.
How Does Verification of Assets Work?
There are two common methods lenders use to verify your assets:
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Manual Submission: You provide recent bank and financial statements (typically the last 2–3 months) for checking, savings, money market, and investment accounts. These documents allow the lender to review your cash balance and transaction history.
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Automated Digital Verification: Many lenders use secure third-party services where you log in to your financial accounts through a secure portal. This process enables instant retrieval and analysis of your transaction history, speeding up the verification process and minimizing human error.
An underwriter reviews this information to confirm that your stated assets align with your actual financial situation.
What Assets Do Lenders Verify?
Lenders prioritize liquid assets but may also consider certain less-liquid assets as part of your reserves:
- Checking and Savings Accounts: Primary sources for funds.
- Money Market Accounts and Certificates of Deposit (CDs): Considered liquid and reliable.
- Stocks, Bonds, and Mutual Funds: Typically counted at a percentage (e.g., 70%) due to market fluctuations.
- Retirement Accounts (401(k), IRA): Usually counted at about 60% vested value, considering taxes and penalties for early withdrawal.
- Cash Value of Life Insurance: Loans against cash value can qualify.
- Gift Funds: Allowed with a formal gift letter confirming the money is a non-repayable gift.
Key Elements Lenders Examine During Asset Verification
- Sufficient Funds: Enough cash to cover your down payment, closing costs, and required reserves, often 2 to 6 months’ worth of mortgage payments.
- Source of Funds: Money must be “seasoned,” generally meaning held in accounts for a minimum of 60 days, to prove it’s your own funds and not undisclosed debt.
- Large or Unusual Deposits: Any significant, unexplained deposits require documentation such as bill of sale or gift letters.
Common Pitfalls to Avoid
- Avoid depositing large amounts of cash shortly before applying, as untraceable cash is a red flag.
- Don’t frequently move money between accounts during the loan process since it complicates the paper trail.
- Prepare gift letters early if using gifted funds.
Related Financial Concepts
For more on mortgage-specific steps, see our Mortgage Loan and Mortgage Pre-approval articles. Understanding underwriting can also help; check out Underwriting Guidelines.
Frequently Asked Questions
Is a VOA the same as a Verification of Employment (VOE)?
No, VOA verifies your assets, whereas VOE verifies your employment and income.
How fast is asset verification?
Manual submission can take days if documents aren’t immediately available, but automated verification services can provide information in minutes.
Why can’t I use cash savings held outside banks?
Lenders require traceable funds—in a bank or investment account—to verify ownership and legitimacy. Depositing savings into a bank account at least 60 days before applying helps “season” the funds.
For more information, visit the Consumer Financial Protection Bureau’s guide to getting a mortgage.
Sources
- Investopedia, “Verification of Asset (VOA)” at https://www.investopedia.com/terms/v/verification-of-asset.asp
- NerdWallet, “Proof of Funds for a Mortgage” at https://www.nerdwallet.com/article/mortgages/proof-of-funds
- Consumer Finance, “What steps do I need to take to get a mortgage?” at https://consumerfinance.gov/ask-cfpb/what-steps-do-i-need-to-take-to-get-a-mortgage-en-1952/
