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.
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.
Asset depletion loans are helpful for several reasons:
Make your dream home a reality with the right mortgage.
View RatesAsset depletion loans are designed for borrowers with substantial financial assets but limited or no traditional income, such as the following:
While lending criteria may vary, standard requirements for an asset depletion loan include the following:
Only certain assets may be considered for asset depletion loan calculation, while others are ineligible:
Eligible Assets
Ineligible Assets
Note: Some assets may be 100% eligible, while others are partially eligible; Retirement accounts may be subject to age-based adjustments.
Borrowers may qualify for an asset depletion loan in the following ways:
As is the case with any loan product, asset depletion loans come with both perks and drawbacks.
Pros
Cons
There are key differences between asset depletion loans and traditional mortgages:
Asset Depletion Loans
Traditional Mortgages
Based on asset value
Based on W-2s and tax returns
Slightly higher than conventional mortgages
Lower rates for borrowers with strong credit and finances
None
Typically capped at 45-50%
Asset-heavy borrowers with little to no traditional income
Employed or self-employed workers with verifiable income
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.
Yes, other income sources, like 1099s or Social Security, may be combined with income from your assets to qualify for an asset depletion loan.
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.
There’s no set minimum, though you’ll need enough assets to cover the lender’s asset depletion calculation.
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.
Generally, yes, interest rates tend to be slightly higher than conventional loans because of the non-traditional underwriting involved.
Asset depletion loans are available from mortgage companies, like Sammamish Mortgage, with experience in these loan programs.
Our loan officers are ready and waiting to help you apply for your home loan.
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.
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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