Net Worth

Gift Funds

If a loan applicant lacks the liquid assets to close a loan, a gift of money from the applicant's relatives may be used to make up the deficit. The gift must be confirmed with a gift letter stating that the money does not have to be repaid.

Assets

Assets include cash, stocks, bonds, real estate, cars, and other types of property. Liquid assets (which can easily converted into cash) are preferable. Lenders are concerned with the net equity in real estate, not the appraised value of the property.

Liabilities

Liabilities include balances on credit cards and charge cards, personal loans, mortgages, and other installment debts.

Net Worth

Net worth is calculated by subtracting liabilities from assets. A substantial net worth shows that the loan applicant can manage money, has enough assets to close the transaction, and could weather a financial emergency if necessary.