We spoke with a mortgage expert to help you determine whether an asset depletion mortgage is the right decision for your financial situation.
It may feel like there are endless mortgage loan options. While we don’t want to add stress by discussing another one, self-employed borrowers, high-net-worth individuals and retirees may find that an asset depletion mortgage is the smartest route for them. That’s because, instead of basing your loan terms on your income – which could be inconsistent for some people – it’s based on your assets. There are some key things you need to know before deciding if you want to proceed with an asset depletion mortgage. We spoke with a mortgage loan expert to help steer you in the right direction.
What is an Asset Depletion Mortgage?
Maybe you’re self-employed, or perhaps you’re retired and looking for a loan. Whatever the case, you don’t have a traditional monthly income. In that situation, an asset depletion mortgage could be beneficial because it qualifies you for a loan based on your liquid assets rather than income. Those assets include cash, bank accounts, real estate and retirement accounts.
“These loans are ideal for borrowers with significant assets but unconventional income,” says Josip Rupena, CEO of Milo. “Qualification criteria vary, so it's important to work with a lender experienced in asset-based financing. A tailored approach ensures borrowers maximize their assets while securing the best possible mortgage terms.”
How Does an Asset Depletion Mortgage Work?
A lender will assess your assets instead of relying on your W-2 income or tax returns. The lender will divide your eligible assets over the loan term to determine if you qualify. This calculation shows them if you can repay the mortgage should you move forward with the loan.
It would be smart to roughly calculate your assets before going to a lender so you know what to expect. Let’s say you’re a homeowner – to figure out how much equity you have in your house, subtract the amount you owe in loans from the property’s current value.
Asset Depletion Mortgage Options
Asset depletion loans are available through conventional, jumbo and non-qualifying mortgage (non-QM) loans.
“Some programs strictly follow agency guidelines, while others offer more flexibility in calculating eligible assets and income,” says Rupena. “The right option depends on the borrower’s financial profile and the lender’s approach to evaluating assets.”
Since asset depletion loans are for people with unique financial situations, you can start by looking for the best mortgage lenders that don’t require tax returns.
The Bottom Line
Most potential borrowers will probably find that an asset depletion mortgage isn’t right for them. However, self-employed borrowers, high-net-worth individuals and retirees can utilize their liquid assets to obtain a loan when a traditional monthly income isn’t part of their financial situation. As Rupena says, look for a lender with asset-based financing experience. It could be the difference between mortgage terms you’re happy with and ones that could be better.
Why You Should Trust Us
Whether it’s financial news or mortgage insight, about 25 million readers rely on Benzinga monthly for their need-to-know information. We don’t skimp on thorough research and enjoy speaking with passionate experts in their work. No matter your level of financial literacy, we aim to speak to a range of readers.
Caitlyn Fitzpatrick, the author of this piece, has been an editor and writer since 2014. Her specialty lies in commerce journalism, which means she’s all about advising readers on how to spend their money smartly – whether it’s on a shopping spree or in a loan agreement. We also spoke with Josip Rupena, CEO of Milo, a crypto-backed mortgage and loan company, to get real-world insight into who should potentially obtain an asset depletion mortgage.
FAQ
What are the rules for asset depletion on an FHA loan?
Federal Housing Administration (FHA) loans are government-backed loans that don’t have an asset depletion program. However, there could be special circumstances. “If a borrower has substantial assets, lenders may consider them under broader guidelines, such as using retirement distributions or other documented withdrawals as qualifying income,” says Rupena.
How do I calculate asset depletion income?
According to Rupena, lenders typically take 70% of retirement accounts and 100% of cash and non-retirement assets and divide the total amount by a certain number of months – let’s say 120 months (aka 10 years). That will determine your “monthly income.”
What is the Fannie Mae asset depletion loan?
Fannie Mae allows borrowers who may not have a traditional monthly income to use their existing assets as “income.” “Under its guidelines, eligible liquid assets – after deducting down payment, closing costs and reserves – are divided by 360 months (the standard 30-year mortgage term) to calculate monthly qualifying income,” says Rupena. “While some lenders or programs may use a shorter 240-month calculation, 360 months is the standard under Fannie Mae’s conventional loan framework.”
Sources
- Josip Rupena, CEO of Milo, a crypto-backed mortgage and loan company
About Caitlyn Fitzpatrick
Caitlyn Fitzpatrick has been a professional writer and editor since 2014 and entered the commerce journalism world in 2017. She’s passionate about helping readers make smart buying decisions by using data insights and interviewing experts. Most recently, Fitzpatrick was the Senior Shopping Editor at Trusted Media Brands, where she led affiliate content on Reader’s Digest. In addition to Benzinga, Fitzpatrick’s work can be found in a range of publications, including U.S. News & World Report’s 360 Reviews, Today’s Parent, Betches, WhatToWatch.com, PS (formerly Popsugar), and more.