Your assets are the things you own. Before they will approve you for a loan, mortgage lenders typically require that you have a job or some steady source of income that will allow you to make the payments. But they also recognize that people can lose their jobs, and other income sources can dry up. That’s why they like to see applicants with other assets that they can convert to cash, if necessary, to keep up with their house payments.
Most mortgage lenders use some variation of the “Uniform Residential Loan Application,” a document drawn up by Fannie Mae and Freddie Mac, two huge government-backed corporations that buy mortgages from lenders. The uniform application divides loan applicants’ assets into two categories: liquid and non-liquid. Liquid assets are those held in cash or easily converted to cash, including checking and savings accounts; stocks, bonds and other securities; and life insurance policies with a cash value. Non-liquid assets are harder to convert into cash but are still valuable. They include real estate, cars, assets in retirement plans, businesses owned by the applicant and any other item of material value. (Got a rare stamp collection? List it under “other.”)