Asset Depletion Loans: Qualifying on What You Have, Not What You Earn
A portfolio can become qualifying income without selling a share. Here is the math lenders use and how to make it work harder.
Plenty of borrowers are wealthy and technically unqualified. They sold a business, retired early, or live off investments, and the monthly income line on a loan application does not describe them at all. Asset depletion, also called asset utilization, fixes that by converting a balance sheet into an income figure.
The formula
Start with eligible assets. Subtract the down payment, closing costs, and any required reserves. Apply the lender's haircut, commonly 100% for cash, 70% to 80% for brokerage, and 70% for retirement accounts before age 59 and a half. Divide the remainder by the amortization term the lender uses, usually 60, 84, 120, or 360 months.
The divisor is the single biggest variable. The same $1.5 million portfolio produces $25,000 a month over 60 months and $12,500 over 120. Shopping that term is most of the value a broker adds on these files.
You do not spend the money
This is the part borrowers find hardest to believe. The calculation is a qualification device, not a withdrawal plan. Your account stays invested and you make the mortgage payment however you like.
Combining with other income
Asset income stacks with pensions, Social Security, part-time wages, and rental income. Many retiree files use a modest pension plus depletion to clear a debt-to-income requirement comfortably rather than relying on either alone.
Getting the most from it
Consolidate accounts two or three months before applying so the statement trail is simple. Avoid moving large sums between institutions during underwriting. And ask specifically about the divisor and the haircuts, because two lenders quoting the same rate can differ by 40% on how much house those same assets will buy.
Does this apply to your situation?
Twelve questions, no credit check, and no email required. See which programs are commonly used for situations like yours.
If your tax returns hide how much your business really makes, a business bank statement loan reads your deposits instead. Here is exactly how the math works.
Personal bank statement programs count the deposits you take home, with no expense factor deducted. Here is when they beat the business version.
Talk through your scenario.
Start an application or book a 20-minute call.