Asset Depletion Loans

Assets used for qualifying must be seasoned for a certain period to ensure stability and liquidity. Assets generally require three months of consecutive statements. However, some programs, such as our Sharp Asset Utilization program, require assets used for qualifying to be seasoned for 120 days (four months).

This varies significantly by program. Under the NQM Funding Flex Supreme guidelines, asset depletion is not supplemental and must be used as the sole source of income. Conversely, under other guidelines (like Edge program), Asset Utilization can be combined with other sources of income (such as rent, pension, Social Security, self-employment, and W2 income). If Asset Utilization is used as a supplemental source of income in the Edge program, the minimum asset requirement is waived, but the maximum DTI is capped at 45%.

Generally, Asset Depletion and Asset Qualifier products are primarily restricted to Primary Residences and, in some guidelines, Second Homes. They are typically ineligible for Investment Properties. Furthermore, Cash-Out Refinance transactions are usually not eligible for the Asset Qualifier program.

Yes, certain programs impose minimum asset requirements, especially when assets are the only qualification source. For instance, the Sharp Asset Depletion/Qualifier programs require borrowers to have a minimum of the lesser of 1 million in Qualified Assets OR 1.25 times the loan balance Qualified Assets**, but never less than **250,000 liquid assets if asset utilization is the only source of income. For the Asset Qualifier product, the calculated residual income (assets divided by the term minus monthly debts) must meet or exceed $1,300 per month.

Eligible assets must generally be verified, liquid, and easily converted to cash. Common asset types and general discounts include:

• Checking, Savings, and Money Market Accounts: Typically calculated at 100% of their verified value.
• Marketable Securities (Stocks, Bonds, Mutual Funds): Discounted due to volatility, often calculated at 80% or 85% of their remaining value.
• Vested Retirement Accounts (401k, IRA): Subject to age limitations. Some programs utilize 70% of the vested value for borrowers under age 59.5, and 80% for those 59.5 or older. These assets must be accessible and not subject to early withdrawal penalties.

Lenders calculate qualifying income by dividing the borrower’s net eligible liquid assets by a fixed term. Common terms used vary by program:

• Many guidelines use 7 years (84 months) for the utilization draw schedule to convert assets into qualifying income.
• Other Passive Asset Utilization programs calculate income over a longer 10-year (120 month) term.
• In some cases, the term used is shorter (36 or 60 months) depending on whether assets are the sole source of income or if the DTI ratio without assets is above 60%.

The primary Non-QM solutions for this demographic are Asset Depletion Loans (or Asset Utilization) and Asset Qualifier Loans.

• Asset Depletion calculates an imputed monthly income stream from the borrower’s verified assets.
• Asset Qualifier determines qualification solely based on the borrower’s liquid or convertible assets, with no employment or income verification needed, meaning no Debt-to-Income (DTI) ratio is calculated for this program.

Asset-rich borrowers are often described as being “income-light” because they may be retired, or their high asset balances are not reflected in a standard monthly income stream. They struggle to qualify for conventional loans because they lack the required W-2s or tax returns used for traditional income verification. Asset Depletion loans allow them to leverage their liquid wealth to demonstrate their Ability to Repay (ATR), often enabling them to secure financing for high-value homes without liquidating large investment portfolios.