Home Loans Based On Assets
Home Loans Based on Assets
Introduction and Program Functionality
Asset Depletion Loans are specialized Non-QM mortgage home loans based on assets designed to assist borrowers who possess substantial assets but have little to no traditional verifiable monthly income (e.g., W-2s or tax returns). These programs allow us to satisfy the federal Ability-to-Repay (ATR) rule by creating a stable, imputed income stream from the borrower’s accumulated wealth.
Target Borrower Profile: This product is ideal for individuals who are asset-rich and income-light. This typically includes recently retired professionals, investors living off investment portfolios, and high-net-worth individuals without a regular paycheck.
Property Eligibility: Asset Depletion and Asset Qualifier programs are primarily intended for loans secured by the borrower’s Primary Residence or a Second Home. They are generally not eligible for financing investment properties.
Asset Amortization and Income Calculation
The qualification principle centers on converting liquid assets into a monthly income figure through a predetermined amortization schedule. This calculated amount is the “Imputed Monthly Income”.
Calculation Methodology
The borrower’s qualifying income is determined by dividing the net eligible assets over a fixed period, which varies slightly by program and risk:
| Amortization Term | Calculation Formula & Usage |
| 84 Months (7 Years) | Net Qualifying Assets / 84 Months = Imputed Monthly Income. This is a common standard used for Asset Depletion calculations. |
| 360 Months (30 Years) | Total liquid assets divided by 360 months. This figure is used as monthly income in some programs, regardless of the actual loan term. |
| 36 or 60 Months | Used for Asset Utilization under certain programs, depending on the Debt-to-Income (DTI) ratio without utilizing assets. A shorter term (36 months) may be used if the DTI is low (e.g., ? 60%); a longer term (60 months) is used if DTI is higher or if assets are the entire income source. |
| 120 Months (10 Years) | Used for Passive Asset Utilization in certain Non-QM guidelines. |
Combining Asset Income with Other Sources
The loan structure dictates whether asset income can be mixed with other sources:
- Sole Source (Asset Depletion/Qualifier): Some strict programs mandate that asset depletion/utilization must be the sole source of qualifying income and cannot be combined with employment income.
- Supplemental Source (Asset Utilization): Other programs permit asset amortization to be used to supplement income sources like W-2 income, self-employment income, Social Security, or pension. If used as a supplemental source, the maximum DTI is typically capped, often at 45%.
Asset Eligibility and Requirements
To be recognized as qualifying funds, assets must meet strict liquidity and seasoning standards:
A. Eligible Assets and Valuation Discounts
Eligible assets must be held in a U.S. bank or financial institution. Cryptocurrency (Bitcoin/Ethereum) may be allowed for reserves in some programs at a discounted value (e.g., 50% or 60% of current valuation), but may be ineligible for the Asset Utilization calculation itself.
Asset Type | Valuation Percentage | Access/Age Requirement |
Depository Accounts | 100% of face value | Checking, Savings, Money Market accounts, CDs. |
Marketable Securities | 80% (Some sources cite 85%) | Stocks, bonds, mutual funds. |
Retirement Accounts (? 59 ½) | 80% | Must have unrestricted access. If utilized, 70% may be used if under 59 ½. |
Life Insurance | 100% of cash surrender value | Must be net of any loans or surrender charges. |
B. Asset Seasoning and Exclusions
- Seasoning: Assets must be seasoned for a minimum period, commonly 90 days. Some programs require 120 days. Statements verifying consecutive activity are required.
- Exclusions: Funds needed for the down payment, closing costs, and required reserves must be excluded from the total assets before the remaining balance is used to calculate the imputed monthly income. Ineligible assets also typically include business assets, gift funds, non-marketable securities, foreign assets, and assets already producing income used for qualification.
Borrower and Transaction Qualification Standards
Due to the non-traditional income method, Asset Depletion Loans require a strong focus on borrower credit and financial stability.
| Qualification Criterion | Typical Requirements |
| Minimum FICO Score | Highly qualified borrowers typically need a minimum FICO of 680 or 700, depending on the LTV requested. |
| Maximum DTI | When DTI is calculated (i.e., using Asset Amortization/Utilization as supplemental income), the maximum DTI is generally 50%. When Asset Utilization is supplemental, the DTI may be capped at 45%. |
| Minimum Asset Threshold | Some programs require borrowers to hold a substantial minimum balance, such as the lesser of $1 million in Qualified Assets OR 1.25 times the loan balance (but never less than $250k liquid assets when asset utilization is the only source of income). |
| Cash-Out Refinance | Often ineligible under the strict Asset Depletion/Qualifier guidelines. If allowed under the broader Asset Utilization category, a lower LTV cap is applied, typically a maximum of 60% LTV/CLTV. |
| Residual Income | For the Asset Qualifier product (where DTI is not developed), the total post-closing assets must meet specific ratios (e.g., 125% of the original subject loan amount), and a minimum monthly residual income (e.g., $1,300 per month) is required. |
| Prior Credit Events | Major derogatory credit events (Foreclosure, Bankruptcy, Short Sale) require significant seasoning. The waiting period is often five (5) years for the Asset Qualifier program. For FTHB in some full-doc programs, the seasoning may require seven (7) years. |
FAQ's
It depends on the lender’s policy (Utilization vs. Depletion). Some programs (like NQM Funding’s Flex Supreme) require asset depletion to be the sole source of income and cannot be mixed with employment income. However, other programs allow Asset Amortization Income to be used independently or with other sources of income.
No, gift funds are generally considered ineligible assets for use in the Asset Depletion or Asset Qualifier income calculation. Gift funds are also ineligible for reserves.
Generally, no. Asset Depletion Loans (or Asset Qualifier programs) are typically designed for purchasing a borrower’s Primary Residence or a Second Home. Investor properties are usually financed using DSCR Loans.
Since these loans rely less on traditional income, a strong credit profile is necessary. The minimum FICO score is often 680 or higher. Some programs require a minimum FICO of 700.
No, borrowers are not required to cash in their assets right away. The assets are used solely to demonstrate an ability to make the mortgage and housing payments. Liquidation is typically only required for funds used for the down payment or closing costs.
Assets generally need to be seasoned for a minimum of 90 days (three months) and verified with consecutive account statements. However, some Asset Utilization programs require up to 120 days of seasoning.
Eligible assets must be liquid and held in a U.S. bank or financial institution. They include checking/savings accounts (100% value), publicly traded stocks/bonds/mutual funds (typically 80% to 85% value), and retirement accounts.
The formula typically involves taking the Net Qualifying Assets (excluding funds needed for closing) and dividing that balance over a fixed amortization period, often 84 months (seven years). Some programs may use a 10-year (120 month) term.
An Asset Depletion Loan calculates an imputed monthly income for a borrower based on the value of their liquid assets. This allows individuals who are “asset-rich and income-light” (such as affluent retirees or investors) to qualify for a mortgage even without traditional W-2s or tax returns.
For purchase and rate/term refinances on a primary residence, the maximum LTV often ranges up to 85%. However, cash-out refinances are often ineligible entirely or capped much lower (e.g., max 60% LTV/CLTV).
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For informational purposes only. No guarantee of accuracy is expressed or implied. Programs shown may not include all options or pricing structures. Rates, terms, programs and underwriting policies subject to change without notice. This is not an offer to extend credit or a commitment to lend. All loans subject to underwriting approval. Some products may not be available in all states and restrictions may apply. Equal Housing Opportunity.
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