Asset Depletion Loans

An asset depletion loan qualifies you based on liquid assets instead of traditional income. Different lenders use various names for this program: Asset Depletion (most common), Asset Utilization, Asset Participation, Asset Qualifier, Asset Dissipation, or Asset-Based Income. While the terminology differs, the core concept is the same—your liquid assets are divided by a specific number of months to calculate monthly qualifying income. The formula and depletion periods may vary slightly between lenders (60-360 months), but all programs convert your wealth into a usable income figure for mortgage qualification.

Lenders use similar but slightly different formulas: Most use Total Eligible Assets ÷ Depletion Period = Monthly Income. However, variations exist: Some lenders use 360 months (30 years) as the standard depletion period, while others offer 60, 84, 120, 180, or 240 months. Asset Utilization programs may apply a 'utilization rate' (e.g., 70% of assets ÷ months). Asset Participation programs might use the remaining loan term instead of a fixed period. Some lenders subtract down payment and closing costs before calculating. Always ask your loan officer which calculation method provides the highest qualifying income for your situation.

Yes, inheritance funds are excellent for asset depletion qualification. Once inherited assets are deposited into your accounts and seasoned for 2-3 months (showing on statements), they can be used just like any other liquid asset. This includes inherited cash, stocks, bonds, IRAs, and other liquid investments. For example, a $1,000,000 inheritance divided by 240 months equals $4,167/month in qualifying income. You don't need to liquidate the inheritance—the calculation is purely for qualification purposes. Inherited real estate or illiquid assets don't count, but proceeds from selling inherited property do qualify once deposited.

Trust income can qualify two ways: (1) Regular distributions documented for 3+ months with 3+ years of expected continuance can be counted as regular income, OR (2) Accessible trust assets can be used for asset depletion calculation. For revocable trusts where you're the beneficiary with access to principal, 100% of liquid trust assets may count. Irrevocable trusts are more complex—only the portion you can access counts. Some borrowers combine both: trust distributions as income PLUS asset depletion on the principal. Provide trust documents and statements to your loan officer for proper structuring.

Absolutely. Lottery winnings taken as a lump sum and deposited into liquid accounts qualify for asset depletion. The key requirements are: funds must be in your name, deposited in eligible accounts (checking, savings, investment accounts), and seasoned for 2-3 months on statements. Whether you won $500,000 or $5,000,000, the calculation works the same: Total Winnings ÷ Depletion Period = Monthly Income. Structured lottery payments (annuities) may also qualify as regular income if documented properly, but lump sums provide more flexibility for asset depletion calculations.

Asset depletion and reverse mortgages serve different purposes: Asset Depletion is a forward mortgage where you make monthly payments, keep your home equity, and your assets remain invested and growing. You're simply using asset values to QUALIFY—not spending them. Reverse Mortgage converts home equity into income, reduces your equity over time, and is only available to borrowers 62+. With asset depletion, you can purchase a new home, refinance, or cash-out while maintaining full ownership and equity growth. It's ideal for those who want to preserve both their liquid assets AND their home equity.

Eligible assets include: checking and savings accounts (100% of balance), stocks and bonds (70-100% after volatility discount), retirement accounts like 401(k) and IRA (typically 70% of vested balance to account for potential taxes/penalties), CDs and money market accounts (100%), mutual funds and ETFs (70-100%), inheritance funds once deposited (100%), lottery/settlement proceeds (100%), and certain trust accounts (varies by accessibility). Non-eligible assets include: real estate equity, business assets, collectibles, cryptocurrency (some lenders now accept), and restricted stock. Lenders require 2-3 months of statements proving asset ownership.

No, asset depletion loans do NOT require tax returns. This is one of the primary benefits—qualification is based entirely on your liquid assets, not income documentation. You'll need to provide: 2-3 months of statements for all asset accounts, proof of funds for down payment, government ID, and credit authorization. This makes asset depletion ideal for: retirees without W-2 income, business owners with complex tax situations, those who recently sold a business, borrowers with significant write-offs, or anyone who prefers not to disclose tax information. Your assets tell the story—not your tax returns.

Most asset depletion programs require a minimum of $500,000 in eligible liquid assets, though some lenders may accept less for smaller loan amounts. The more assets you have, the more flexibility in choosing your depletion period and qualifying for larger loans. Remember to account for: down payment (20-25%), closing costs (2-4% of loan amount), and reserves (6-12 months PITI after closing). For example, to purchase an $800,000 home with 25% down, you'd need roughly $200,000 for down payment, plus $600,000+ in remaining assets for the depletion calculation and reserves.

Asset depletion loans typically close in 30-45 days, similar to other NON-QM products. The timeline depends on: how quickly you provide complete asset statements, appraisal turnaround time, title work completion, and underwriting review. Having organized documentation upfront (all account statements, down payment source documentation) can expedite the process. Some lenders offer expedited closings in 21-28 days with complete documentation. Complex situations involving trusts, multiple accounts, or large inheritances may require additional time for verification.

Yes, many borrowers combine asset depletion with other income to maximize qualifying power. Common combinations include: Social Security + asset depletion, pension income + asset depletion, trust distributions + asset depletion on trust principal, rental income + asset depletion, and part-time employment + asset depletion. This hybrid approach allows you to use a longer depletion period (lower monthly asset income) while still qualifying for your desired loan amount. Your loan officer can help structure the optimal combination based on your income sources and asset levels.

Minimum credit scores start at 620, but 640+ is preferred for better rates and terms. Here's how credit score affects your loan: 740+: Best rates, lowest down payment requirements (20%), most favorable terms. 700-739: Competitive rates, standard 20-25% down payment. 660-699: Slightly higher rates, may require 25% down. 620-659: Higher rates, typically 25-30% down required, may have loan amount limits. Since you're qualifying on assets rather than income, lenders place significant emphasis on credit history and payment patterns. Strong credit combined with substantial assets creates the most favorable loan scenarios.