Qualify Criteria For Asset Depletion Loan
Qualify Criteria For Asset Depletion Loan Program Overview and Target Borrower Profile
The qualify criteria for asset depletion loan is a financing solution specifically tailored for borrowers who are described as “asset-rich and income-light”, who may face complications securing a traditional mortgage because W-2s, tax returns, or employment verification guidelines rely on active earnings.
Asset depletion loans, also known as Asset Qualifier or Passive Asset Utilization programs, are non-Qualified Mortgages (Non-QM) designed to assess a borrower’s ability to repay a loan based on their accumulated wealth rather than conventional income documentation. This mechanism is crucial for us to meet Ability-to-Repay (ATR) requirements.
Ideal Candidates Include:
- Recently retired professionals.
- High-net-worth individuals who rely on portfolios rather than paychecks.
- Investors living off their accumulated assets.
Product Distinction: Asset depletion is singularly focused on borrowers who have high asset balances but do not meet standard income verification requirements. This program typically funds mortgages for a borrower’s Primary Residence or a Second Home. It is generally not eligible for investment properties, which are typically addressed by DSCR (Debt Service Coverage Ratio) loans.
Calculation Methodology: Imputing Monthly Income
The core principle of an asset depletion loan is the conversion of a borrower’s net liquid asset balance into a qualifying monthly income stream.
| Calculation Component | Standard Criterion / Formula |
| Qualifying Formula | Qualifying Income = Net Qualifying Assets / Amortization Period (in months) |
| Amortization Period | The most commonly cited fixed term for calculating imputed income is 84 months (seven years). |
| Residual Income Calculation | Some specific programs (e.g., our Non-QM Connect) calculate Residual Income by dividing assets by 60 months (five years). Other programs may use a 120-month (10-year) term for Passive Asset Utilization. |
| Net Assets Defined | The assets used for calculating income must exclude funds designated for the down payment, closing costs, and any required reserves. |
Asset Eligibility and Requirements
Assets utilized in the calculation must be verified, liquid, and meet specific seasoning and eligibility criteria.
A. Eligible Assets and Discount Factors (Haircuts)
Eligible assets are typically held in U.S. banks or financial institutions. Non-U.S. assets are generally ineligible.
| Asset Type | Percentage Used for Calculation | Notes |
| Checking/Savings | 100% | Must be held in a Depository Account. |
| Marketable Securities | 80% (One source cited 85%) | Includes publicly traded stocks, bonds, and mutual funds. |
| Retirement Accounts | Varies by Age | Subject to age and access restrictions without penalty. |
| Retirement (? 59 ½) | 80% (If unrestricted access) | If the account is tax-deferred, one source requires a 40% reduction for taxes and penalties. |
| Retirement (< 59 ½) | 70% (Some programs use 60%) | Reflects potential tax penalties for early withdrawal. |
| Life Insurance | 100% of cash/surrender value | Must be the surrender value, not the face value. |
Asset Seasoning and Ownership
- Seasoning: Assets must typically be verified and seasoned for a minimum period with consecutive statements. This period is commonly 90 days, though some programs require 120 days.
- Borrower Alignment: All individuals listed on the asset account must also be borrowers on the loan.
- Ineligible Funds: Ineligible assets include business accounts/funds, gift funds, accounts held in an irrevocable trust, non-marketable/restricted stock, foreign assets, and assets already generating income used for qualification.
Borrower Qualification Standards
To secure an asset depletion loan, the borrower must meet minimum standards regarding credit quality, equity contribution, and debt management.
| Requirement | Standard Criteria |
| Minimum FICO | Generally ranges from 680 to 700 or higher. For one program, the minimum is 680. |
| Maximum LTV/CLTV | Purchase and Rate/Term Refinance LTVs typically cap at 75% to 85%. |
| Cash-Out Restriction | Cash-Out Refinance is frequently ineligible for the core Asset Qualifier program. If permitted (Asset Utilization product line), the maximum LTV is often lower, such as 60%. |
| DTI/Residual Income | For the Asset Depletion program, the maximum DTI is typically 45% to 50%. For the Asset Qualifier program, a Residual Income (monthly funds remaining after PITIA/debts) is required, sometimes stipulated at a minimum of $1,300. |
| Minimum Asset Threshold | Some programs require borrowers to have a minimum of $450,000 in Qualifying Assets, or a minimum of $250,000 in liquid assets when it is the sole source of income. |
| Prior Credit Events | Major derogatory events (Foreclosure, Bankruptcy, Short Sale) require seasoning. This waiting period is typically five (5) years. One guideline requires seven (7) years seasoning for foreclosures if the borrower is a First-Time Home Buyer (FTHB). |
Income Combination Rules
A critical distinguishing factor of asset depletion loans is how the calculated income interacts with other documented income sources:
Usage Type | Rule Summary |
Asset Depletion as Sole Source | Under some programs (e.g., NQM Funding’s Flex Supreme), the asset depletion calculation must be used as the sole source of qualifying income. It cannot be combined with employment income (W-2, self-employment) or rental income. |
Asset Depletion as Supplemental Income | Other Non-QM programs (Asset Utilization) permit combining asset income with other sources like W-2 income, self-employment income, rent, pension, or Social Security. If utilized as a supplemental source, the maximum DTI ratio is often capped at 45%. |
FAQ's
Borrowers typically need a strong credit score, often required to be 680 or higher. Some programs, like the Asset Qualifier under our Connect, require a minimum FICO score of 700.
It depends on the program: Under NQM Funding’s Flex Supreme program, asset depletion must be the sole source of income and cannot be combined with other income sources. However, some of our programs allow Asset Amortization to be used independently or with other sources of income.
No. Asset Depletion Loans (Asset Qualifier programs) are typically designed for financing the borrower’s Primary Residence or a Second Home. Separate products, such as DSCR loans, are tailored for investment properties.
While many Non-QM programs allow a DTI up to 50%, if Asset Utilization is used as a supplemental source of income, the maximum DTI is typically capped at 45%. For the strict “Asset Depletion” model, the DTI must qualify per the respective program matrix.
Yes, but they are typically subject to a discount. Retirement assets for borrowers under 59 ½ are generally counted at 70% or 60% of the vested value. Retirement accounts for borrowers aged 59 ½ or older may be counted at 80% (or sometimes 100% if deposited).
No. Funds used for the down payment, closing costs, and required reserves must be excluded (subtracted) from the total asset balance before the income calculation is performed.
Eligible assets must be liquid and held in a U.S. bank or financial institution. They commonly include checking and savings accounts (100% value), marketable securities like stocks/bonds (80% value), and vested retirement accounts.
Assets must be verified as held, or “seasoned,” for a minimum period, commonly 90 days (3 months). However, some Edge Utilization programs require seasoning of 120 days (4 months).
The qualifying income is typically calculated by taking the borrower’s Net Qualifying Assets and dividing that total by a fixed amortization term, usually 84 months (seven years). However, some programs may use 120 months (10 years) for Passive Asset Utilization.
The main goal of an Asset Depletion Loan is to calculate a borrower’s imputed monthly income based on their liquid assets, rather than requiring traditional documentation like W-2s or tax returns. This is necessary for the lender to establish the borrower’s Ability-to-Repay (ATR) the loan.
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