Asset Depletion Loans by Shining Star Funding
Program Profile and Scope
Asset Depletion Loans (also known as Asset Amortization or Asset Qualifier) are Non-QM products designed for high-net-worth borrowers who may be “asset-rich and income-light,” such as retired professionals or investors living off their portfolios, as the shift from a paycheck to portfolio-based income often complicates mortgage qualification under traditional guidelines.
Asset Depletion Loans by Shining Star Funding come in various options and cover wide spectrum of asset rich borrowers.
A. Loan Purpose and Occupancy
Asset Depletion Loans are generally restricted to financing the borrower’s Primary Residence or a Second Home. Investment properties typically fall under DSCR loan guidelines.
B. Cash-Out Eligibility
Cash-Out Refinance transactions are frequently not eligible under the core Asset Depletion/Asset Qualifier programs. If asset utilization is permitted for a cash-out, the Loan-to-Value (LTV) is often capped lower (e.g., maximum 60% LTV/CLTV in some programs).
Imputed Income Calculation Methodology
The fundamental mechanism of an Asset Depletion Loan is converting liquid assets into a consistent, imputed monthly income stream used to demonstrate the borrower’s Ability-to-Repay (ATR) the loan.
A. Standard Amortization Term
The primary method for calculating imputed income involves amortizing the borrower’s net eligible assets over a fixed period:
- The most common standard term used in many programs (including our Advantage and Sharp Depletion) is 84 months (seven years).
- The calculation is: Net Qualifying Assets / 84 Months = Imputed Monthly Income.
- Some of our programs utilize alternate terms, such as 60 months (five years) to determine gross income for residual income calculations (Asset Qualifier product), or 120 months (ten years) for Passive Asset Utilization.
B. Asset Exclusion
Crucially, any funds needed for the down payment, closing costs, and required reserves must be excluded from the total asset balance before the imputed income calculation is performed.
Asset Eligibility and Valuation
Assets used for an Asset Depletion Loan must be liquid, verifiable, and meet specific seasoning requirements.
| Asset Type | Valuation Percentage | Seasoning/Access Requirement |
| Depository Accounts | 100% | Checking, Savings, Money Market accounts. |
| Marketable Securities | 80% (Some use 85%) | Stocks, bonds, mutual funds. |
| Retirement Accounts (? 59 ½) | 80% (or 70%) | Requires vested funds and unrestricted access without penalty. |
| Retirement Accounts (< 59 ½) | 70% (or 60%) | Discounted due to potential early withdrawal penalties. |
| Minimum Seasoning | 90 days (3 months) | Assets must be seasoned and verified with consecutive statements. Some programs require 120 days. |
Ineligible Assets: Generally, business accounts, unseasoned foreign assets, gift funds, and assets held in an irrevocable trust are ineligible for the asset calculation.
Borrower Qualification and Income Integration
A. Minimum Financial Thresholds
Borrowers seeking an Asset Depletion Loan must demonstrate a strong financial history:
- Minimum FICO: Minimum required credit scores generally range from 680 to 700.
- Maximum LTV: Maximum LTV may be reduced, sometimes by 10% from standard LTVs, though LTV caps often reach 85%.
- Minimum Assets: Some strict programs (like Sharp) require a minimum of 450,000inQualifyingAssets??.Alternatively,someprogramsrequiretheborrowertoholdthelesserof??1 million OR 1.25 times the loan balance in Qualified Assets (but never less than $250k liquid assets when assets are the sole source of income).
B. Income Combination Rules
We offers different qualification tracks based on how the asset income is used:
- Asset Depletion as Sole Income Source: Certain programs (like NQM Funding’s Flex Supreme and our Sharp Depletion) require the asset calculation to be the sole source of qualifying income and cannot be combined with employment income.
- Asset Utilization as Supplemental Income: Under our Advantage and Edge programs, Asset Amortization Income can be used with other sources of income (like rent or W-2 income). In these supplemental scenarios, the maximum DTI ratio is typically capped at 45%.
- Asset Qualifier (Residual Income): For this specialized track, a standard DTI is not developed. Instead, the residual income (monthly funds remaining after debts) must meet or exceed a minimum threshold, such as $1,300 per month.
FAQ's
It depends on the program: Under NQM Funding’s Flex Supreme (Asset Depletion) guidelines, the asset calculation must be the sole source of income. However, our Advantage/Edge programs (Asset Amortization/Utilization) allow it to be combined with other sources of income (like rent or W-2 income).
Reserves are not required for the strict Asset Depletion and Asset Qualifier programs because the assets themselves are leveraged to demonstrate repayment ability. Reserves are generally required for other Alt Doc programs.
Retirement accounts for borrowers under 59 ½ are discounted due to potential penalties and are typically counted at 70% of the vested value. Some Horizon programs count these at 60%.
No. Funds used for the down payment, closing costs, and required reserves must be excluded (subtracted) from the total assets before the remaining balance is used to calculate the imputed monthly income.
Assets must be verified as held for a minimum of 90 days. Some specific programs require assets to be seasoned for 120 days (four months) before use in the Asset Utilization calculation.
Eligible assets must be liquid and held in a U.S. bank or financial institution. Acceptable assets include checking and savings accounts (100% of value), marketable securities (stocks/bonds) (80% of value), and vested retirement accounts.
No. Asset Depletion programs are typically restricted to financing the borrower’s Primary Residence or a Second Home. They are generally ineligible for investment properties.
Borrowers typically need a strong credit profile. Minimum FICO scores generally range from 680 or higher. For certain Sharp Premium programs utilizing asset depletion, a minimum FICO of 700 is required.
The lender calculates an “Imputed Monthly Income” by dividing the borrower’s Net Qualifying Assets over a fixed draw schedule, which is commonly set at 84 months (seven years).
This loan is an ideal financing solution for borrowers who are asset-rich and income-light, such as affluent retirees, investors living off their portfolios, or recently retired professionals.
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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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