Gyroscopic Investing

I'm saving to buy my first house in the next 2-4 years. I've got all my savings in the PP. Right now all my gold is in ETFs. I'd like to get around 1/2 of it, exchange it for physical bullion, then and put it into a safety deposit box.

What worries me is that once the gold is in physical form, it wouldn't be counted as an asset for mortgage qualification purposes. I don't know that for certain, but it seems at best it's a major risk. Since my PP is my entire net worth at this point, that's potentially 25% of my net worth gone for qualification purposes, which could be significant.

That said, I doubt I'd actually get the largest mortgage I qualify for, since I'm a firm believer in living below your means. At the same time, who the heck knows how tight lending rules will be in 2-4 years...I'd rather not risk being rejected right when the perfect property comes available. Or even if I am approved, if the "reduced" assets will hike up my mortgage interest rate.

Thoughts?

What, you don't think gold in the form of an ETF wouldn't count as an asset?  Funny.

MachineGhost wrote: What, you don't think gold in the form of an ETF wouldn't count as an asset?  Funny.

Do banks even care about your individual holdings within brokerage accounts?

Sam Brazil wrote:

MachineGhost wrote: What, you don't think gold in the form of an ETF wouldn't count as an asset?  Funny.

Do banks even care about your individual holdings within brokerage accounts?

If I remember correctly when I appliled for a mortgage back in 2007 they counted my brokerage assets and 401k at 60%

Sam Brazil wrote:

MachineGhost wrote: What, you don't think gold in the form of an ETF wouldn't count as an asset?  Funny.

Do banks even care about your individual holdings within brokerage accounts?

I don't believe they do.  They just look at the total.  In general, lenders are not so concerned with your assets as they are with your credit and ability to repay the loan.  They will look at your income, how long on the job and your credit history.  I would suggest that you talk to a lender now and get pre-qualified even though you do not intend to purchase for some time.  Then you can update the info every 6 months or so to keep it current.  When ready to purchase you'll be good to go.

Desert wrote: I agree with AlanW, banks mostly care about your income, other debt payments, and credit rating.  They also care about where the down payment comes from.  So if you'll need to sell physical gold to make a down payment, you'll need to keep good records so you can show where the money came from.  But in general, banks care more about your ability to make payments than they do net worth.

Net worth is still part of the equation and his question is whether they will count physical gold if I read it correctly. It's not about selling it for the down payment....unless I missread.

Kshartle wrote:

Desert wrote: I agree with AlanW, banks mostly care about your income, other debt payments, and credit rating.  They also care about where the down payment comes from.  So if you'll need to sell physical gold to make a down payment, you'll need to keep good records so you can show where the money came from.  But in general, banks care more about your ability to make payments than they do net worth.

Net worth is still part of the equation and his question is whether they will count physical gold if I read it correctly. It's not about selling it for the down payment....unless I missread.

Physical gold listed on a loan application will have little effect on the underwriters decision.  That decision will be based on income, job stability, debt payments and credit. If those are excellent, you should have no problem even if you left gold off the application. However, as mentioned, if the gold is to be used for part of the down payment you should have precise records of purchase and sale. This is also true for any other asset used for the down payment.

Alanw wrote:

Kshartle wrote:

Desert wrote: I agree with AlanW, banks mostly care about your income, other debt payments, and credit rating.  They also care about where the down payment comes from.  So if you'll need to sell physical gold to make a down payment, you'll need to keep good records so you can show where the money came from.  But in general, banks care more about your ability to make payments than they do net worth.

Net worth is still part of the equation and his question is whether they will count physical gold if I read it correctly. It's not about selling it for the down payment....unless I missread.

Physical gold listed on a loan application will have little effect on the underwriters decision.  That decision will be based on income, job stability, debt payments and credit. If those are excellent, you should have no problem even if you left gold off the application. However, as mentioned, if the gold is to be used for part of the down payment you should have precise records of purchase and sale. This is also true for any other asset used for the down payment.

How do you use gold as a downpayment? Wouldn't he just have dollars?

Are you saying the bank will want to know where he got the dollars?

You would need a paper trail for the purchase and the sale of the gold.  Receipts for the purchase and the same for the sale. The dollars would then be used for the down payment.  I doubt that any lender would accept gold for a down payment.

Alanw wrote: You would need a paper trail for the purchase and the sale of the gold.  Receipts for the purchase and the same for the sale. The dollars would then be used for the down payment.  I doubt that any lender would accept gold for a down payment.

Why do you need the paper trail? Will they ask to see where the dollars came from?

Kshartle wrote:

Alanw wrote: You would need a paper trail for the purchase and the sale of the gold.  Receipts for the purchase and the same for the sale. The dollars would then be used for the down payment.  I doubt that any lender would accept gold for a down payment.

Why do you need the paper trail? Will they ask to see where the dollars came from?

Yes. Lenders will not accept dollars that appear out of nowhere. That down payment money has to be verified that it is from a legitimate source such as accumulation over time, sale of an asset, company bonus, gift, etc.

Alanw wrote:

Kshartle wrote:

Alanw wrote: You would need a paper trail for the purchase and the sale of the gold.  Receipts for the purchase and the same for the sale. The dollars would then be used for the down payment.  I doubt that any lender would accept gold for a down payment.

Why do you need the paper trail? Will they ask to see where the dollars came from?

Yes. Lenders will not accept dollars that appear out of nowhere. That down payment money has to be verified that it is from a legitimate source such as accumulation over time, sale of an asset, company bonus, gift, etc.

I think they are worried that such magically appearing money is the result of an undisclosed loan (e.g. from parents, hard money lender, etc.)

That and to curtail money laundering efforts.

Alanw wrote: That and to curtail money laundering efforts.

Either way, I think a few months of seasoning is pretty cursory