Asset Depletion: Using Savings and Investments to Qualify

Asset-rich but income-light

Some borrowers have substantial savings, investments or retirement accounts but don't show much income on paper. Retirees, people between careers, investors living on portfolio returns, and high-net-worth individuals often fall into this group. Traditional lenders focus on monthly income, so these borrowers can have trouble qualifying even when they're financially strong.

Asset depletion, sometimes called asset-based or asset utilization lending, solves this by converting a portion of your verified assets into a monthly income figure for qualifying.

How the calculation works

The general idea is to take your eligible assets, subtract what you'll use for down payment, closing costs and required reserves, and divide the remainder by a set number of months. The result is treated as monthly income.

For example, if you have $1,500,000 in eligible assets after the down payment and reserves, and the lender uses a 360-month divisor, your asset income would be about $4,167 per month. Different lenders and programs use different divisors and rules, so the same assets can produce different qualifying income depending on the program.

Which assets count?

Eligible assets usually include checking and savings accounts, money market accounts, certificates of deposit, brokerage accounts with stocks, bonds and mutual funds, and retirement accounts like IRAs and 401(k)s. Lenders may count only a percentage of investment and retirement balances to account for market volatility, taxes and early withdrawal penalties.

Assets typically need to be seasoned, meaning they've been in your accounts for a period of time, and you'll provide recent statements. Assets like real estate equity, business ownership, or cryptocurrency are often treated differently or excluded, depending on the lender.

You don't have to spend your assets

A common misconception is that you have to drain your accounts to use an asset depletion loan. You don't. The assets are used to calculate qualifying income; you generally keep them invested. You'll still need to make your mortgage payment, of course, using whatever income sources you rely on.

Combining asset income with other income

Asset income can often be combined with other income such as Social Security, pension, annuity or part-time employment income. For many retirees, that combination makes qualifying straightforward.

Conventional vs. non-QM options

Some conventional programs allow a form of asset-based qualifying with specific rules. Non-QM asset depletion programs tend to be more flexible about how assets are counted and the property types allowed, though rates may be somewhat higher. As a broker, I can compare both types to see which works best.

Who it's a good fit for

Asset depletion can be a strong fit for retirees buying a new primary home or second home, people who sold a business and are living on proceeds, and investors with large portfolios. It can also help borrowers whose income is irregular but whose savings are substantial.

Things to keep in mind

Requirements vary by lender, including credit, down payment and reserves. Large recent deposits may need documentation. And because rules differ significantly, it's worth comparing programs rather than accepting the first answer you get. Consider talking to your financial or tax advisor about how financing fits your broader plan.

Next steps

If you have strong assets but not much documented income, asset depletion may be the path to the home you want. Let's look at your accounts and estimate your qualifying income together.