Home Loans For Asset Rich Borrowers
Program Introduction and Borrower Profile
This product is specifically designed for individuals who are “asset rich borrowers and are income light”.
Asset Depletion Loans (or Asset Qualifier Loans) are a vital segment of the Non-Qualified Mortgage (Non-QM) market. These loans provide a mechanism for us to satisfy the federal Ability-to-Repay (ATR) rule by calculating a reliable monthly income based on a borrower’s liquid assets, instead of relying on traditional W-2s, pay stubs, or tax returns.
Target Borrower Profile:
- Retired Professionals: Individuals who have shifted from a regular paycheck to portfolio-based income, complicating traditional mortgage qualification.
- Investors Living Off Portfolios: High-net-worth individuals without a regular paycheck.
- Prime Non-QM Borrowers: Borrowers with pristine credit who simply wish to maintain liquidity by financing the purchase, rather than buying the home outright.
Asset Amortization and Income Calculation
The cornerstone of the Asset Depletion Loan is converting verifiable liquid assets into an imputed monthly income stream.
A. Income Formula and Terminology
The calculated income amount is used to determine the borrower’s Debt-to-Income (DTI) ratio or Residual Income.
1. Standard Amortization Period: The most commonly used fixed term for converting assets to qualifying income is 84 months (seven years). This calculation is:
84 Months/Net Qualifying Assets=Imputed Monthly Income
2. Alternative Amortization Periods: Depending on the program and DTI without asset income, other amortization terms may be used:
60 months (five years), used when the borrower’s entire income is comprised solely of assets, or for Residual Income calculations under some programs.
360 months (the duration of most mortgage loans) is referenced as a calculation term in some general guidelines.
3. Loan Type Qualification: For the Asset Depletion product line, loans are eligible for Purchase and Rate/Term Refinance. Cash-Out Refinances are frequently ineligible. When a cash-out is permitted under the Asset Utilization category, a lower maximum LTV is typically applied (e.g., max 60% LTV/CLTV).
B. Eligible Assets and Discount Factors
Assets must be liquid, verifiable, and generally seasoned for a minimum period.
Asset Type | Standard Valuation Percentage | Notes |
Depository Accounts | 100% | Checking, Savings, and Money Market Accounts. |
Marketable Securities | 80% | Publicly traded stocks, bonds, and mutual funds. |
Retirement Accounts (> 59 ½) | 80% | If the borrower has unrestricted access without penalty. |
Retirement Accounts (< 59 ½) | 70% | Discounted due to potential tax penalties for early withdrawal. |
Cash Value of Life Insurance | 100% | Based on cash surrender value. |
Asset Requirements and Restrictions:
Seasoning: Assets must typically be seasoned for a minimum of 90 days. Some programs require up to 120 days of seasoning.
Asset Exclusion: Funds designated for the down payment, closing costs, and required reserves must be subtracted from the total assets before the imputed income calculation is performed.
Ineligible Assets: Business funds, foreign assets, gift funds, and accounts held in an irrevocable trust (unless the borrower has immediate access as a beneficiary) are typically ineligible.
Loan and Borrower Qualification Standards
Asset Depletion programs require stringent qualifications on credit quality, focusing heavily on the borrower’s overall financial stability.
| Qualification Area | Standard Requirement |
| Occupancy Type | Limited to Primary Residence and Second Homes. Investment properties are ineligible. |
| Minimum FICO Score | Typically requires a minimum FICO of 680 to 700. |
| Maximum LTV | Purchase and Rate/Term LTVs generally range from 75% to 85%. |
| Debt-to-Income (DTI) | For Asset Depletion programs where DTI is calculated, the maximum is generally capped at 50%. |
| Residual Income (Asset Qualifier) | Some programs (Asset Qualifier) require total post-closing assets to exceed 125% of the original subject loan amount. Additionally, a minimum monthly residual income (after PITIA/debts) is sometimes stipulated, such as $1,300 per month. |
| Prior Credit Events | Significant derogatory credit events (Foreclosure, Bankruptcy, Short Sale, Deed-in-Lieu) usually require a minimum seasoning period of four or five years. |
| Minimum Asset Threshold | Some programs require borrowers to hold a minimum of 450,000??inQualifyingAssets.Othersrequireaminimumof??250,000 net liquid assets when asset utilization is the only source of income. |
Combining Asset Income with Other Sources
The treatment of the imputed asset income depends on whether the loan is classified as a strict Asset Depletion or the more flexible Asset Utilization model:
- Sole Source Requirement (Asset Depletion): Certain stringent programs (e.g., NQM Funding’s Flex Supreme or Sharp Expanded Asset Depletion) mandate that the asset calculation must be the sole source of qualifying income, prohibiting combination with employment income.
- Supplemental Source (Asset Utilization): Other Non-QM programs (such as our Advantage and Edge series) explicitly permit Asset Utilization to be used as a supplemental income source along with other documented income (e.g., pension or W-2 income). In these combined scenarios, the maximum DTI ratio is often limited to 45%.
FAQ's
Funds designated 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.
It depends on the program. Some stringent programs (like NQM Funding’s Flex Supreme) require asset depletion to be the sole source of income. However, other programs allow Asset Amortization Income to be used supplementally alongside other income sources.
Because these loans rely on non-traditional income documentation, lenders require a strong credit profile. A minimum credit score of 680–700 or higher is often preferred to qualify.
Generally, no. Asset Depletion Loans (Asset Qualifier programs) are typically restricted to financing a borrower’s Primary Residence or a Second Home. Investment properties are handled by separate non-QM products, such as DSCR Loans.
No. Borrowers are not required to cash in their assets right away. The assets are simply used to demonstrate the borrower’s financial ability to repay (ATR) the mortgage and housing payments over the long term.
No. While accounts like checking and savings are generally counted at 100%, marketable securities (stocks/bonds) are often discounted to 80% or 85% of their value. Retirement accounts are also discounted based on the borrower’s age and accessibility.
Eligible assets must be liquid and typically held in a U.S. financial institution. Common eligible assets include checking and savings accounts, money market accounts, mutual funds, stocks, bonds, and vested retirement accounts (like 401(k) or IRA).
Lenders calculate an imputed monthly income by taking your net liquid assets and dividing them by a fixed period, which is typically 84 months (seven years). Some calculations may divide the total assets over 360 months (the duration of most mortgage loans).
The primary type of loan used for this qualification method is called an Asset Depletion Loan. It is also known as an “Asset Qualifier” loan or “asset dissipation”.
These loans are designed for borrowers who are asset-rich and income-light, such as recently retired professionals, investors living off their investment portfolios, or high-net-worth individuals without a regular paycheck.
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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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