Asset Depletion Loans

Not all qualified home buyers are salaried employees with a steady income and regular paycheck. Many high-net-worth individuals — like business owners, retirees, or those living off dividends — have substantial assets but no regular income. For these types of borrowers, qualifying for a mortgage the conventional way might not work.

Fortunately, other loan types, like asset depletion loans, offer an alternative path to homeownership for borrowers who might not meet conventional income criteria but have valuable liquid assets.

This article will walk you through what asset depletion loans are, how they work, and who they’re most suitable for.

What Is an Asset Depletion Loan?

An asset depletion loan is a type of non-qualified (non-QM) loan that lets borrowers qualify for a mortgage based on assets instead of traditional documents, like W-2s or tax returns.

Instead of calculating a debt-to-income (DTI) ratio based on an employment salary, lenders “deplete” the borrower’s assets over a specific period to determine a qualifying income.

Who Are Asset Depletion Loans Best Suited For?

Asset depletion loans are designed for borrowers with substantial financial assets but limited or no traditional income, such as the following:

  • Retirees with retirement savings and/or investment portfolios but little to no earned income.
  • Self-employed individuals with significant write-offs, fluctuating income, or seasonal income.
  • High-net-worth investors with liquid assets.
  • Entrepreneurs with complex income streams..
  • Beneficiaries who receive one-time distributions..

Why This Program Works

Asset depletion loans are helpful for several reasons:

  • No minimum asset requirement: As long as the borrower has the funds, a seasoned lender can use that financial figure to qualify the borrower.
  • Simple income calculation: Asset value is assessed to determine qualifying income.
  • Flexible LTV options: Up to 80% loan-to-value (LTV) may be used for purchases, and up to 75% LTV for cash-out refinances.
  • Flexibility with property types: Asset depletion loans can work for various types of properties, including primary residences, second homes, and investment properties.

What Assets Can Be Used vs. Excluded?

Only certain assets may be considered for asset depletion loan calculation, while others are ineligible:

Eligible AssetsIneligible Assets
  • Savings and checking accounts (liquid and accessible)
  • Money market accounts
  • U.S. Treasuries with a maturity of less than 1 year
  • Publicly-traded stocks and bonds
  • Mutual funds
  • Retirement assets (401k, IRA, SEP, KEOUGH)
  • Equity in real estate
  • Privately-traded or non-vested stocks
  • Restricted stock units (RSUs)
  • Assets already producing income
  • Business-owned assets
  • Irrevocable trusts
  • Charitable trusts/donor-advised funds
  • Foreign assets

Note: Some assets may be 100% eligible, while others are partially eligible; Retirement accounts may be subject to age-based adjustments.

How to Qualify For an Asset Depletion Loan

Borrowers may qualify for an asset depletion loan in the following ways:

  1. Use assets alone: Relying solely on assets, there’s no need for tax returns or W-2s.
  2. Blend assets with other income sources: Other sources of income, like bank statements, 1099s, or VOE (verification of employment)-only, may be considered along with valuable assets.

Asset Depletion Loan Requirements

While lending criteria may vary, standard requirements for an asset depletion loan include the following:

Credit ScoreMinimum 620 FICO required.
Down PaymentTypically 15% – 25% required, depending on credit and property type.
Debt-to-Income DTI RatioNo DTI is required with sufficient assets.
Asset HoldingAssets must be held in an account for at least 60 days.
Asset VerificationFull paper trail including bank/brokerage statements.

Pros and Cons of Asset Depletion Mortgages

As is the case with any loan product, asset depletion loans come with both perks and drawbacks.

Pros

  • No employment or self-employment income required.
  • Suitable for retirees or investors with valuable assets.
  • Flexible underwriting criteria.
  • No W-2s or tax returns required.

Cons

  • Higher interest rates than conventional mortgages.
  • Requires substantial liquid assets.
  • Some assets may not be counted.
  • Not available from all lenders.

Asset Depletion Loans vs. Traditional Loans

There are key differences between asset depletion loans and traditional mortgages:

Asset Depletion LoansTraditional Mortgages
Income VerificationBased on asset valueBased on W-2s and tax returns
Interest RatesSlightly higher than conventional mortgagesLower rates for borrowers with strong credit and finances
DTI LimitsNoneTypically capped at 45-50%
Best ForAsset-heavy borrowers with little to no traditional incomeEmployed or self-employed workers with verifiable income

FAQs

  • Do I have to liquidate my assets to qualify for an asset depletion loan?

No, asset depletion loans don’t require asset liquidation. Lenders use the balance of assets to calculate qualifying income. This can help avoid negative tax implications that come from liquidating assets.

  • Can I combine asset depletion with other income sources?

Yes, other income sources, like 1099s or Social Security, may be combined with income from your assets to qualify for an asset depletion loan.

  • What properties can I buy using an asset depletion mortgage?

You can use an asset depletion loan to finance primary residences, second homes, and investment properties, including condos, townhomes, and single-family homes. Properties can be located anywhere, including in Seattle, Portland, Los Angeles, Boise, Denver, or elsewhere in the Pacific Northwest and beyond.

Is there a minimum in asset value needed to qualify?

There’s no set minimum, though you’ll need enough assets to cover the lender’s asset depletion calculation.

  • Who is this loan best suited for? 

Asset depletion mortgages are ideal for high-net-worth borrowers, retirees, self-employed individuals, business owners, or anyone with substantial assets but limited or irregular income.

  • Are interest rates higher for asset depletion loans? 

Generally, yes, interest rates tend to be slightly higher than conventional loans because of the non-traditional underwriting involved.

  • Where can I apply for an asset depletion loan? 

Asset depletion loans are available from mortgage companies, like Sammamish Mortgage, with experience in these loan programs.

Final Thoughts

Asset-heavy individuals may find asset depletion loans more suitable than traditional mortgages, particularly with little to no income for lenders to verify. These loans give you more flexibility when traditional loan options fall short. But like all non-traditional loans, asset depletion loans require careful planning. Be sure to work with a seasoned mortgage lender who understands your financial position and can offer you a loan suitable for your situation.

Need Financing?

If you’re looking to buy a home in the Pacific Northwest region but don’t have the traditional income documentation to qualify for a conventional loan, we can help. At Sammamish Mortgage, we offer various self-employed mortgage home loan programs for those without traditional employment documentation in WA, OR, ID, CO, and CA. Visit our website to get an instant rate quote, or get in touch with us today to have your mortgage questions answered!

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