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Chris Salese

As home prices continue to rise, it’s common for the size of your average loan amount to become larger, too.

Unless you’re able to secure a bigger down-payment to offset the difference, you’ll likely need to make some loan qualification adjustments to keep pace.

Some of the more customary adjustments might include lowering your purchase price expectations, asking a family member for help in the form of gift funds or adding a co-signor to your application.

But often, many borrowers forget to look at their own asset accounts as a way to bridge the gap.

For example, let’s say you have a few asset accounts such as a checking, savings or money market account with adequate funds in them.

When you buy a home, you’ll typically need to withdraw a specific amount from these accounts to contribute toward your down-payment and closing costs.

Although funds in these types of accounts can be easily liquidated, it may not be the best option to drain the accounts in their entirety if you’re faced with having to come up with additional funds to complete your home purchase.

In this situation, assuming there’s a need to qualify for a larger loan amount to chase the higher purchase price without having to deplete all of your liquid funds, it usually falls back to the total available income in your loan application to determine if you have any extra borrowing capacity to make that happen. One of the ways your lender could further evaluate your income is if you have overtime, bonus or commission earnings on top of your base pay structure. However, if you don’t have any of those supplemental income streams to consider, you might want to carefully look further into your retirement account instead.

Unfortunately, borrowers quickly try to withdraw a large chunk of money from their retirement account to add to their current liquid funds to help chase a higher home purchase price.

Often times, this is a bad strategy for plenty of reasons that I’m sure your financial adviser would take the time to explain to you why in greater detail. If a withdrawal doesn’t make sense from your retirement account, then the creation of a distribution income stream from your retirement account could be an option to boost your qualifying income in your home loan application.

Your lender will need to assess whether the distribution income is able to continue for at least three years after the date of your mortgage application and that you have unrestricted access with no penalty to the accounts from which the income is derived. Furthermore, if your assets are in the form of stocks, bonds or mutual funds, then only 70 percent of their value may be used to determine the number of distributions remaining to account for the fluctuating values of those assets.

Since this is a complicated strategy for tax reasons, you want to obtain guidance from your tax professional and of course from your financial adviser before starting this income stream.

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Chris Salese can be reached at or 707-363-4439. He is a licensed California mortgage lender (LO NMLS #254469 — State License #CA-DBO 254469 — Corp License #4170013 Corp NMLS #3113) and equal housing lender.