Fannie Mae Guidelines: Asset Documentation Requirements in DU

How DU Determines Your Asset Documentation Requirements

Desktop Underwriter analyzes your loan application and tells your lender exactly what asset documentation you need to provide. The system looks at your transaction type, loan amount, and down payment to determine the minimum verification requirements.

For purchase transactions, you'll need two consecutive monthly bank statements showing 60 days of account activity. If you're refinancing, DU typically requires only one monthly statement covering 30 days of activity.

Say you're buying a $400,000 home with a $80,000 down payment. DU will require your lender to verify that you have the funds for your down payment, closing costs, and reserves. You'll need to provide two months of bank statements for all accounts you're using for the transaction.

When DU Waives Asset Documentation

DU can waive asset documentation entirely for certain refinance transactions. If the total funds you need to verify are $500 or less, the system may not require any asset documentation at all.

This typically happens on limited cash-out refinances where you're rolling closing costs into the loan amount and need minimal cash to close. Your lender will still need to calculate your funds to close, but DU won't require bank statements or other asset verification.

Bank Statement Requirements and Timing

Your bank statements must be current when you apply for your loan. Monthly statements need to be dated within 45 days of your initial loan application date. If you're using quarterly statements, they must be dated within 90 days of application.

Your lender must also confirm that funds shown on quarterly statements haven't been transferred to another account that's verified with more recent documentation. This prevents you from moving money around to inflate your asset picture.

A Verification of Deposit (Form 1006) can substitute for bank statements. Your lender sends this form directly to your bank, which completes it and returns it directly to the lender. This eliminates any concern about altered statements.

Special Asset Categories and Entry Requirements

Bridge Loans and Swing Loans

Enter bridge loan amounts in section 2a of your loan application as a separate asset type. Don't include the same money in both a bridge loan entry and a checking account balance.

If you're selling your current home and buying a new one simultaneously, the bridge loan amount must be subtracted from your net equity calculation for the pending sale. This prevents double-counting the same funds.

Earnest Money Deposits

Earnest money goes in section 2b of the loan application and reduces your required funds to close. The system assumes your earnest money check has cleared your bank account, so don't include this amount in your bank account balances.

Your lender needs documentation showing you actually made the earnest money deposit. This usually means a copy of the cancelled check or a receipt from the title company or real estate agent.

Gifts and Grants

Gifts and grants are entered in section 4d and marked as either "deposited" or "not deposited." If you've already received and deposited gift funds, include the amount in your bank account balance but don't count the gift amount separately in available funds.

If the gift hasn't been deposited yet, don't include it in your bank account balance, but DU will count the gift amount toward your available funds for closing.

Proceeds from Property Sales

Properties Already Sold

If you've already sold a property, the proceeds must be sitting in a depository account like checking or savings. You'll need bank statements showing the deposit and any subsequent activity.

Your lender will want to see the settlement statement from the sale to verify the net proceeds amount. Large deposits that don't match expected sale proceeds will require explanation.

Properties Pending Sale

For properties you're selling concurrent with your purchase, calculate the net equity outside of DU and enter it in section 2b using the asset type "Proceeds from Real Estate Property to be Sold on or Before Closing."

Net equity equals your expected sale price minus your existing mortgage balance, selling costs, and any bridge loan amount. If the calculation results in negative equity, DU subtracts this amount from your available funds.

Other Liquid Assets and Personal Property

You can use proceeds from selling personal assets like cars, boats, or jewelry for your transaction. Enter the expected proceeds in section 2b using "Proceeds from Sale of Non-Real Estate Asset."

DU will require evidence of the asset's value and confirmation that you converted it to cash before closing. This might include an appraisal of valuable items and documentation of the actual sale.

Life insurance cash value is entered in section 2a using the "Cash Value of Life Insurance" account type. You'll need documentation from the insurance company showing the available cash value and any loan restrictions.

Secured Borrowed Funds and Asset-Backed Loans

You can borrow against assets you own, such as 401(k) accounts or investment accounts, to fund your transaction. Enter the loan amount in section 2b as "Secured Borrowed Funds."

Subtract the borrowed amount from the asset's total value when entering the remaining asset balance. If you have $50,000 in your 401(k) and borrow $15,000 against it, enter $15,000 as secured borrowed funds and $35,000 as retirement funds.

Loans secured by liquid assets like retirement accounts don't need to be entered as liabilities if you provide proper documentation. However, loans secured by real estate must be entered as mortgage liabilities in the appropriate section.

When DU Validation Overrides Standard Requirements

DU's validation service can sometimes verify your assets electronically through direct connections with financial institutions. When this happens, DU issues a message indicating what documentation is acceptable for your specific situation.

If DU validates your assets electronically, following the validation message requirements satisfies the documentation requirement, even if it differs from the standard bank statement requirements described in the guidelines.

This validation can streamline your application process, but it's not available for all borrowers or all financial institutions. Your lender will know whether validation is available for your accounts.

Common Documentation Pitfalls

Large deposits that appear on your bank statements without explanation will delay your loan approval. Your lender must source and document any deposit that's not clearly from employment or other verified income sources.

Transferring money between accounts during the application process can complicate verification. If you move funds, your lender needs to track the money trail to ensure you're not borrowing undisclosed funds or inflating your asset picture.

Cryptocurrency, foreign bank accounts, and other non-traditional assets require special handling. These assets may not qualify for your transaction or may need additional documentation beyond standard bank statements.

References

For the official guidelines, see B3-4.4-02: Requirements for Certain Assets in DU in the Fannie Mae Selling Guide.