Who is eligible for asset depletion loans
Who is eligible for asset depletion loans?The primary eligibility criterion for Asset Depletion Loans is possessing significant assets while having minimal or no traditional W-2 or tax-return income.
Asset Depletion Loans (Asset Utilization) are non-traditional mortgages that calculate a borrower’s qualifying income based on the value of their liquid assets.
Ideal Borrower Profiles
| Eligible Borrower Profile | Key Characteristics |
| Affluent Retirees | This is the perfect clientele for these loans. They include recently retired professionals and former small business owners who have shifted from a paycheck to portfolio-based income. |
| High-Net-Worth (HNW) Individuals | Borrowers who have substantial investment portfolios, high asset balances, and are often without a regular paycheck. |
| Portfolio Investors | Individuals who are living off their portfolios or who could buy the home outright but choose to finance the purchase to keep their money invested elsewhere and maintain liquidity. |
| Self-Employed (Income-Light) | Self-employed borrowers or entrepreneurs who may legally show little to no income on tax returns due to deductions but have significant liquid assets. Note: These borrowers often opt for Bank Statement Loans, but Asset Depletion is an alternative if they have sufficient reserves. |
| Borrowers with Unique Goals | Homeowners looking to refinance and cash out equity for needs like healthcare or borrowers seeking a loan with certain features like interest-only payments. |
Financial and Credit Requirements
Because Asset Depletion Loans utilize alternative income documentation, we mitigate risk by imposing stricter requirements on credit strength and asset levels.
A. Required Asset Thresholds
We often set minimum asset requirements that must be met to qualify for the program:
- Minimum Qualifying Assets: Borrowers must have a minimum of $450,000 in Qualifying Assets.
- Loan Coverage: For the Asset Depletion program, borrowers must demonstrate they have the lesser of $1 million in Qualifying Assets OR Qualifying Assets that are greater than or equal to 125% of the original subject loan amount.
- Asset Seasoning: Assets must be seasoned for at least 90 days and located in a U.S. bank or financial institution. Some guidelines, such as the Sharp Series, require assets to be seasoned for 120 days.
- Asset Amortization: The imputed monthly income is typically calculated by dividing the Net Qualifying Assets by a fixed term, usually 84 months (seven years).
B. Credit and Affordability Metrics
Borrowers must meet specific credit and debt-to-income (DTI) thresholds:
- Credit Score: A strong credit history is required. A credit score of 680–700 or higher is often preferred. Specific programs require a minimum FICO score of 700 for Asset Depletion.
- DTI Ratio: The imputed income is used to calculate the DTI ratio. While traditional mortgages target 43%, Non-QM lenders (Shining Star Funding) may allow DTI exceptions up to 50%.
- Asset Qualifier: For the Asset Qualifier product, which avoids a DTI calculation, the borrower must meet a minimum residual income threshold.
- Credit History: Borrowers must typically have no recent major credit events. The seasoning period after events like Bankruptcy/Foreclosure for the Asset Qualifier product is five (5) years.
Residency and Property Eligibility
Asset Depletion loans are generally intended for consumer loans (owner-occupied) and have strict rules regarding the borrower’s residency status and the property’s use.
| Eligibility Factor | Status | Details |
| Citizenship/Residency | Eligible | U.S. Citizens and Permanent Resident Aliens are eligible. Non-Permanent Resident Aliens are also eligible, subject to restrictions like maximum LTV caps. |
| Property Occupancy | Eligible | Eligible transactions are typically limited to Primary Residence (Owner-Occupied) and Second Homes. |
| Loan Purpose | Eligible | Purchase and Rate/Term Refinance transactions are eligible. |
| Loan Purpose | Ineligible | Cash-Out Refinances are often ineligible for loans using Asset Utilization/Depletion. |
| Income Use | Restriction | Under some programs (like NQM’s Flex Supreme), asset depletion is not supplemental and must be used as the sole source of income. Borrowers using Asset Depletion/Asset Qualifier cannot use other sources of employment income. |
Ineligible Borrower Types (General Exclusion)
Certain borrower types are generally ineligible for Asset Depletion products, though they may qualify for other Non-QM products like DSCR or ITIN loans:
- Foreign Nationals.
- ITIN Borrowers (in most programs).
- Irrevocable or Blind Trusts.
- LLCs (generally ineligible for consumer/owner-occupied AD loans).
- Borrowers without a Social Security Number (in many programs).
- Borrowers with diplomatic immunity.
- Borrowers less than 18 years old.
FAQ's
Foreign Nationals (who primarily live and work outside the U.S.) are ineligible, as are borrowers relying on an Individual Taxpayer Identification Number (ITIN) in most programs.
Cash-Out Refinance transactions are generally not eligible for loans using Asset Utilization/Depletion.
Yes, Non-Permanent Resident Aliens are eligible borrowers for Asset Depletion loans, provided they meet restrictions like maximum LTV caps.
No, under strict program guidelines, asset depletion must be used as the sole source of income and the borrower cannot use other sources of employment income.
Yes, ADLs are ideal for self-employed borrowers who show little or no income on tax returns due to deductions but have significant assets.
Assets must generally be seasoned for at least 90 days or three (3) months, and they must be located in a U.S. bank or financial institution.
Borrowers must typically have a minimum of $450K in Qualifying Assets across both the Asset Depletion or Asset Qualifier programs.
Borrowers must typically have a strong credit history. Minimum FICO scores often start at 680, although some programs require a minimum 700 FICO.
They provide a way for lenders to determine the borrower’s Ability-to-Repay (ATR) by calculating an imputed monthly income from their liquid assets, bypassing reliance on W-2s or tax returns.
The loans are tailored for individuals who are asset-rich and income-light, such as affluent retirees, recently retired professionals, and investors living off their portfolios.
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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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