Updated: Apr 1, 2019
Asset depletion is a way to calculate monthly income by dividing a borrower’s total assets by a set
number of months. However, the borrower is not required to cash in their assets they're only used to
demonstrate that they are able to make the mortgage and housing payments.
When using an asset depletion program to qualify, borrowers do not need to show any source of income or employment.Instead, their asset depletion calculations based on a combination of cash, retirement, and investment monies divided by 360 payments. Assets are generally qualified with 100% of cash accounts and 70% of retirement and investment accounts (100% of retirement funds may be used if the borrower is over 59 ½ years old). For example, if a 50 year old borrower has $3,000,000 in liquid assets, and another $1,000,000 in retirement and investment funds, then their qualifying monthly income would be $10,278 ($3,000,000 + $700,000 = $3,700,000; divided by 360 = $10,278).
Asset depletion may be the ideal solution for asset rich individuals who are unable to provide a qualifying employment history or sufficient income.
Although, it is important to keep in mind that not all loan programs will allow asset depletion as an acceptable income source. To learn more about asset depletion and determine whether this method will work for your specific transaction give us a call today