When calculating liquid assets for a loan, what will an underwriter include regarding the sale of an old home?

When assessing a borrower’s financial situation, an underwriter evaluates liquid assets to determine the borrower's ability to repay a new loan. In the case of the sale of an old home, the underwriter will focus on the net equity in that property.

Net equity refers to the portion of the home that is owned free and clear of any outstanding mortgage balances. It is calculated by subtracting the total remaining mortgage balance from the home's current market value. This figure is crucial as it represents actual cash that the borrower could access through the sale of the property.

In addition to serving as a significant component of the borrower's overall financial picture, the net equity can also be utilized as a source of funds for a down payment or closing costs on the new home. Thus, it directly contributes to the underwriter's assessment of the borrower’s financial ability to handle the new mortgage obligation.

The other options do not align with what liquid assets represent for the underwriter's evaluation. The purchase price of the new home and the total mortgage balance of the old home do not show the actual cash position available to the borrower. Additionally, disregarding the equity from the old home would ignore a vital part of the borrower's financial resources. Therefore, focusing on net equity