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Balance Sheet and Net Worth
When planning to buy real estate, one should complete a balance sheet and also a planned post-purchase balance sheet. A balance sheet will allow you to calculate your net worth. Net worth is your total assets minus your total debts. A positive net worth is viewed favorably by lenders, in case you lose your job or are temporarily unable to pay your mortgage. This will also will allow a buyer to measure the impact on net worth of a potential real estate purchase.
Below is an example of a balance sheet and a planned post-home purchase balance sheet:
PRE-PURCHASE BALANCE SHEET
| Assets | 401k | $75,000 |
| Checking Account | $2,000 | |
| Savings Account | $3,000 | |
| Home Down Payment | $35,000 | |
| Auto (market value) | $14,000 | |
| Other Liquid Assets | $5,000 | |
| Total Assets | $134,000 | |
| Debts | Auto Loan Balance | $10,000 |
| Credit Card 1 Balance | $3,000 | |
| Credit Card 2 Balance | $2,000 | |
| Total Debt | $15,000 | |
| Net Worth (a - d): | $119,000 |
POST-PURCHASE BALANCE SHEET FORECAST
| Assets | Home (market value) | $175,000 |
| 401k | $75,000 | |
| Checking Account | $2,000 | |
| Savings Account | $0 | |
| Auto (market value) | $14,000 | |
| Other Liquid Assets | $5,000 | |
| Total Assets | $271,000 | |
| Debts | Mortgage Balance | $140,000 |
| Auto Loan Balance | $10,000 | |
| Credit Card 1 Balance | $3,000 | |
| Credit Card 2 Balance | $2,000 | |
| Total Debt | $155,000 | |
| Net Worth (a - d): | $116,000 |
NOTES:
1. $3,000 expense is assumed for closing costs.
2. Savings account balance is $0 after purchase due to closing costs.
3. Net Worth is reduced by $3,000 due to closing costs.
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