One Financing Strategy Every Realtor Should Know: Asset Depletion
For buyers with meaningful assets but limited traditional income, asset depletion financing may create another path to qualification.
When assets tell a fuller story
Retirees, investors, and people between careers may have substantial assets even when current taxable income is modest. An asset depletion program can convert eligible assets into a calculated monthly qualifying income under lender guidelines.
This can be especially useful when a client has the funds to purchase but does not fit conventional income documentation rules. It is one of several specialized financing options that may help a buyer whose situation is more complex than a standard pay stub suggests.
How the calculation may work
Lenders determine which assets are eligible, apply required reductions, subtract reserves, and divide the remaining eligible amount over a specified number of months. The exact formula and treatment of retirement accounts vary by program.
The original newsletter gave this illustration: a $1,000,000 brokerage account, valued at 90% under that example program, yields $900,000 of eligible assets. After $40,000 in required reserves, $860,000 divided over 60 months equals approximately $14,333 in calculated qualifying monthly income. This example is not a current program quote or loan approval.
What to ask early
Ask whether the buyer has brokerage, cash, or retirement assets that could support qualification. Review account type, access restrictions, reserves, and planned down payment with a lender before an offer.
- What types of assets does the buyer hold?
- How much will remain after closing?
- Does the lender require a particular asset history or documentation?
- Would a conventional or another non-QM program be a better fit?
The takeaway
A buyer who looks income-light on paper may still have financing options. A scenario review early in the search can prevent an eligible buyer from being overlooked. Asset treatment, rates, down payment, and loan amounts depend on current lender rules and the borrower's full profile.