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Income and credit score requirements are a staple in the traditional world of mortgage financing. But sometimes what shows on paper doesn’t always reflect a borrower’s true financial capabilities. Many borrowers may not collect a regular income, but have plenty of wealth in the form of valuable assets.
For these types of borrowers, a traditional mortgage may not work. However, other forms of financing, like asset-based lending, can help these types of borrowers secure a loan to make a home purchase.
Let’s break down what asset-based lending is, how it works, the potential benefits and risks involved, and when it makes the most sense.
Also referred to as a ‘true collateralized loan’, asset-based lending is a form of financing in which loans are secured by collateral instead of strictly cash flow or creditworthiness. For example, borrowers might collateralize their loan with any of the following assets:
Lenders use these assets as security for the loan, which reduces their risk and may result in lower interest rates compared to unsecured loans. If the borrower defaults on the loan, the lender can liquidate the collateral to recoup funds.
Asset-based lending is suitable for the following types of borrowers:
Asset-based lending structures may vary depending on a borrower’s specific needs:
| Asset Depletion Loans | Borrowers may qualify for a mortgage by converting their liquid assets into a calculated monthly income. |
| Asset Utilization Loans | Borrowers may qualify for a mortgage by using their liquid assets as proof of financial strength instead of traditional income. |
Traditional mortgages tend to focus on documents like W-2s, tax returns, and pay stubs to help lenders verify a borrower’s income.
But many financially qualified borrowers — including the self-employed, business owners, and investors — either don’t have these documents, or their true earnings and wealth aren’t accurately depicted on these documents. Instead, lenders may look at other documents as a means of financial health.
Qualifying for asset-based lending typically requires verification of the following:
You may also be required to complete a form to confirm that the assets listed as collateral are not being used for borrowing and are liquid and accessible.
Several assets are typically excluded in asset-based lending, either because they’re not liquid, not fully vested or transferable, difficult to verify, or outside the borrower’s control:
Asset-based lending can be an ideal loan option for borrowers who may not meet traditional lending standards, but they also come with potential drawbacks to consider.
Asset-based lending is one type of loan that falls under the umbrella of non-QM (Qualified Mortgage) lending. Other loan types are also included in this category, including bank statement mortgage loans. Here’s how asset-based lending and bank statement loans compare:
| Asset-Based Lending | Bank Statement Loans | |
| Income Verification | Based on value of liquid assets | 12–24 months of deposits in bank accounts |
| Debt-to-Income Ratio | None with sufficient assets | Maximum 45% — 50% |
| Credit Score | Minimum 620+ | Minimum 620+ |
| Down Payment | Typically 15% – 25% | 10% is generally acceptable |
| Best For | High-net-worth individuals | Self-employed |
Ideal candidates include high-net-worth borrowers, retirees, and investors with substantial assets but limited reportable income.
Commonly accepted assets include bank accounts, retirement accounts, stocks, bonds, and mutual funds.
No, while liquidity of assets is a plus, your assets remain undisturbed and don’t have to be sold to qualify.
Yes, while lenders focus on assets, they’ll still pull your credit report to verify your creditworthiness.
Asset-based mortgages typically require at least a 15% down payment, depending on credit score and property type.
Asset-based mortgages may be used for various property types, including primary residences, vacation homes, and investment properties.
Asset-based loans are very niche and aren’t widely available. You’ll need to work with a specialized mortgage lender, like Sammamish Mortgage, to use asset-based lending to finance your next property purchase.
Asset‑rich borrowers facing traditional income hurdles may find asset‑based mortgages a viable alternative, allowing for flexible approval based on wealth instead of pay stubs and W-2s. If you’re a retiree, investor, or high-net-worth borrower with substantial assets and unique lending needs, this mortgage option may be worth considering.
If you’re looking to buy a home in the Pacific Northwest but don’t have the standard income documents for a traditional loan, we’re here to assist you. At Sammamish Mortgage, we offer various mortgage home loan programs for borrowers with unique lending needs in Washington, Oregon, Idaho, Colorado, and California. Check out our website to get an instant rate quote, or reach out to us today with any questions you have about your mortgage!
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.