How much down payment do you need for asset depletion loans
General Down Payment Requirements for Non-QM Loans
Asset Depletion Loans fall within the Non-QM category. To confirm how much down payment do you need for asset depletion loans often aligns with the higher thresholds expected of non-conforming financing.
- In general, Non-QM loans require higher down payments than traditional financing.
- The overall down payment requirements for Non-QM loans typically range from 10% to 30%.
- Borrowers should expect to need a down payment of at least 20% or more, depending on individual circumstances.
- Some guidelines suggest that borrowers using the asset depletion program should have 25 to 30 percent for the down payment readily available.
- The larger down payment helps to offset the risks associated with features like limited documentation, higher Debt-to-Income (DTI) ratios, and interest-only features common in Non-QM lending.
Maximum Loan-to-Value (LTV) and Corresponding Down Payments
The minimum down payment required is determined by the maximum allowable Loan-to-Value (LTV) ratio for the specific Asset Depletion program being used.
| Program/Scenario | Maximum LTV | Minimum Down Payment |
| Asset Depletion (General Expectation) | N/A | 20% or more is often preferred/required. |
| Sharp Expanded / Sharp Premium (General AD) | 85% LTV | 15% minimum down payment. |
| Sharp Expanded (High LTV/DTI Scenario) | 80% LTV | 20% minimum down payment, required for DTI up to 55%. |
| Edge Series (Primary and Second Homes) | 80% LTV | 20% minimum down payment. |
| Edge Series (Investment Properties) | 65% LTV | 35% minimum down payment. |
| Edge Series (Cash Out Refinance) | 60% LTV | 40% minimum equity required. |
| NQM Funding Flex Supreme | Max LTV must be reduced by 10% from standard LTVs. | Varies, but LTV is reduced due to documentation type. |
Specific LTV Overlays
Some program features or loan purposes may trigger an LTV reduction, resulting in a higher down payment requirement:
- For borrowers who are First-Time Homebuyers and are living rent-free, the LTV may be capped at 80% (20% down).
- When a property is located in a Declining Market, a 5% LTV reduction may be applied to the maximum LTV the borrower qualifies for.Borrower Contribution and Source of Funds
In addition to meeting the overall LTV minimum, we impose rules on how much of the down payment must come directly from the borrower’s own funds and whether gift funds are permitted.
A. Borrower’s Own Funds (Minimum Borrower Contribution)
On purchase transactions, the borrower must generally make the down payment with funds from their own resources.
- For purchase transactions under the Prime Non-QM Series, a minimum of 3% of the purchase price must come from the Borrower’s own funds.
- In the Non-QM Edge Series, if the LTV exceeds 75% (i.e., the down payment is less than 25%), the borrower must have 5% of their own funds documented.
- If the LTV is less than 75%, no minimum borrower contribution of their own funds is required.
B. Use of Gift Funds
Gift funds may be utilized towards down payment requirements, subject to specific LTV restrictions.
- Horizon Programs: Gift funds are eligible provided the borrower meets a minimum contribution of 5% for a primary residence and 10% for a second home. Gift funds may be used for the down payment and closing costs on a Primary Residence or Second Home when the LTV is ? 75%.
- Edge Series: Gift funds are not permitted for reserves, but they are permitted for the down payment on a purchase transaction.
- Exclusion from Depletion Calculation: Any gift funds utilized must be excluded from the Net Qualifying Assets used in the Asset Depletion calculation.
C. Asset Documentation Requirements
Regardless of the source, all funds used for the down payment must be verified:
- Assets used for the down payment must be verified with account statements for the most recent 2 months and reflect a consecutive 60 days of asset verification.
- Funds needed for the down payment and closing costs must be excluded from the assets available for the depletion calculation.
- Any large deposit (e.g., greater than 5% of the loan amount or one month’s total gross income) must be fully explained and sourced to be eligible for the down payment.
FAQ's
Under some Edge Series guidelines, if the LTV is less than 75%, no minimum contribution of the borrower’s own funds is required for the down payment.
Gift funds may be utilized towards down payment requirements, though some programs may require the borrower to contribute a minimum percentage first, such as 10%.
Yes, under some guidelines like NQM Funding’s Flex Supreme program, the maximum LTV for asset depletion loans is reduced by 10% from standard LTVs.
Yes, in the Prime Non-QM Series, a minimum of 3% of the purchase price must come from the Borrower’s own funds.
Cash-Out Refinance transactions using Asset Utilization often have a maximum LTV of 60%, meaning the borrower must have a minimum of 40% equity.
Non-QM loans, including Asset Depletion, require larger down payments because they are considered higher risk investments for the lender, which helps offset these risks associated with flexible income verification.
Asset Utilization loans secured by investment properties may be limited to 65% LTV, requiring a minimum of 35% down payment.
Some Non-QM loans require a minimum down payment of 15%.
For Asset Depletion programs, the maximum LTV is often capped at 85%, which translates to a 15% minimum down payment.
Borrowers should generally expect to need a down payment of at least 20% or more, although some programs may require 25% to 30% down.
527 Sycamore Valley Rd W, Danville, CA 94526
Toll Free Call : (866) 280-0020
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.
Interactive calculators are self-help tools. Results received from this calculator are designed for comparative and illustrative purposes only, and accuracy is not guaranteed. Shining Star Funding is not responsible for any errors, omissions, or misrepresentations. This calculator does not have the ability to pre-qualify you for any loan program or promotion. Qualification for loan programs may require additional information such as credit scores and cash reserves which is not gathered in this calculator. Information such as interest rates and pricing are subject to change at any time and without notice. Additional fees such as HOA dues are not included in calculations. All information such as interest rates, taxes, insurance, PMI payments, etc. are estimates and should be used for comparison only. Shining Star Funding does not guarantee any of the information obtained by this calculator.
Privacy Policy | Accessibility Statement | Term of Use | NMLS Consumer Access
CMG Mortgage, Inc. dba Shining Star Funding, NMLS ID# 1820 (www.nmlsconsumeraccess.org, www.cmghomeloans.com), Equal Housing Opportunity. Licensed by the Department of Financial Protection and Innovation (DFPI) under the California Residential Mortgage Lending Act No. 4150025. To verify our complete list of state licenses, please visit www.cmgfi.com/corporate/licensing