How Asset Depletion Programs Works

Did you know?  You don’t necessarily need a salary or earn self-employment income to qualify for a loan!  “Asset depletion” is a way to extrapolate a fictional revenue stream from a borrower’s financial assets to qualify for a conventional loan – whether that revenue is actually realized or not.  This additional income stream can sometimes make or break a borrower’s loan qualification.

For example, if a borrower has no job but $800,000 in retirement accounts, $250,000 in a stock brokerage account, plus $60,000 sitting in the bank, we can probably figure out a monthly income amount that can be used to qualify for a certain loan amount.  How much will mainly depend on the lender and the specific loan profile.

Lenders have traditionally allowed depletion of assets but with widely varying formulas on how to compute the income.  Factors may include minimum asset balances, reserve requirements and discount percentages depending on how the funds are held and whether the borrower is retirement age or not.

One of our most attractive programs allows the borrower to use 100% of cash (checking/savings), 70% of stock and 60% of retirement – even if less than retirement age (59.5 years).  With at least a $500,000 cumulative sum, you simply divide by the number 84 to arrive at a monthly income amount.

For example, if a borrower has no job but $800,000 in retirement accounts, $250,000 in a stock brokerage account, plus $60,000 sitting in the bank, we can probably figure out a monthly income amount that can be used to qualify for a certain loan amount.  How much will mainly depend on the lender and the specific loan profile.

So using the numbers above, we would have…

$800,000 x 60% = $480,000
$250,000 x 70% = $175,000
$60,000 x 100% = $60,000
Total Sum           = $715,000

Total monthly income  = $8512/month
($715,000 / 84)

With minimum asset requirements, not everyone will qualify, but if they do, it is a life-saving solution that avails borrowers of the best rates available without the need to pledge any assets, nor provide extensive documentation.  Borrowers can use asset depletion as the sole source of income, or to supplement the income they already earn, in order to qualify for higher home prices.