Asset Depletion Mortgage Loans Explained

An asset depletion loan, also called an asset utilization or asset-based mortgage, lets you qualify using savings and investments instead of a paycheck. The lender takes your eligible assets, subtracts what you need for the purchase, and divides the rest by a number of months the program sets to create a monthly qualifying income figure. It is built for people with substantial assets but little or irregular income on paper.

How an asset depletion mortgage works

The idea is simple: if you have enough liquid wealth, you could draw on it to make your mortgage payments over time, so the lender treats that potential draw as income. You are not required to actually withdraw money each month. The calculation is a way of measuring capacity, not a spending plan.

The process usually runs in four steps. First, the lender verifies the balances in your eligible accounts. Second, it applies any haircut the program requires to accounts that could lose value or carry withdrawal costs. Third, it subtracts the funds you will use for the down payment, closing costs and required reserves. Fourth, it divides the remaining amount by the program's set number of months. The result is your asset-based income, which can stand alone or be added to other income such as Social Security, a pension or part-time earnings.

Under the CFPB Ability-to-Repay rule, the lender must still make a reasonable, good-faith determination that you can repay. Documented assets are the evidence it relies on.

How eligible assets are counted

Not every dollar you own counts the same way. Lenders generally sort assets by how liquid and how stable they are:

Cash in checking, savings and money market accounts is usually counted in full.
Stocks, bonds and mutual funds in brokerage accounts are commonly counted at a reduced value to allow for market swings.
Retirement accounts such as IRAs and workplace plans may be counted after allowing for taxes and any early-withdrawal penalties, and often only if you can access the funds.
Assets that are pledged, borrowed against or hard to sell, such as business equity, real estate or collectibles, are generally excluded.

Accounts usually need to be in your name, and jointly held accounts may require the other owner to be on the loan or sign off. Funds that arrived suddenly will need to be sourced. How withdrawals from retirement accounts would be taxed is a personal question, so talk to a tax professional.

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Who an asset depletion loan fits

These loans are most common among retirees who live on investment accounts rather than a salary, and among people who have sold a business or property and hold the proceeds. They also suit early retirees, heirs, people between careers, and self-employed borrowers whose returns show modest income but who have built up significant savings. Some borrowers combine asset-based income with a pension or Social Security to reach the figure they need.

If most of your wealth is tied up in real estate or a closely held business, an asset depletion loan may not count much of it. Rental-property loans based on the property's rent are a separate category.

Fannie Mae and Freddie Mac asset-based guidance

Asset-based qualifying is not only a non-QM idea. Fannie Mae's Selling Guide has a section on using employment-related assets, such as retirement accounts, lump-sum retirement distributions and severance, as qualifying income. The lender verifies the assets, subtracts funds needed for the transaction and reserves, and spreads the remainder over the loan's amortization period. Fannie Mae limits this to certain transaction types and occupancy, and excludes some kinds of assets.

Freddie Mac's Seller/Servicer Guide has its own section on using assets as a basis for repayment. It allows certain retirement, bank and securities accounts, and in some cases proceeds from the sale of a business, to be converted into a monthly qualifying amount after subtracting funds needed to close. It also carries its own eligibility conditions on property type, transaction type and asset ownership.

The agency versions are narrower than many non-QM programs. Non-QM asset depletion loans may accept a wider range of assets, property types or transactions, often at higher pricing because they carry more risk for the investor. If you fit an agency path, it is worth pricing first.

Documents lenders commonly ask for

Recent statements for every account you want counted, showing ownership and balances
Retirement account terms showing whether funds are accessible
Records explaining large deposits, such as a sale closing statement
Statements for any other income, such as Social Security or a pension
Government ID and credit authorization
Details on any loans secured by your investment accounts

Asset depletion vs. a traditional income loan

A traditional loan asks what you earn. An asset depletion loan asks what you hold. If your income is enough on paper, a standard loan is usually simpler and may cost less. If your income is low but your balance sheet is strong, asset depletion may be the method that shows your real capacity.

Pros and trade-offs

Pro: no job or business income is required to qualify.
Pro: you keep your investments in place; the calculation does not force withdrawals.
Pro: can be combined with pension, Social Security or other income.
Trade-off: you need a large pool of liquid assets for the math to work.
Trade-off: non-QM versions often price higher than agency loans.
Trade-off: assets used for the down payment and reserves are subtracted before income is calculated.

How to get started

List every account you hold, with the type, owner and approximate balance, and set aside anything pledged or hard to sell. Then ask a licensed loan officer to run the asset depletion calculation and, if you may fit, an agency asset-based scenario alongside it. Asset-based loans are subject to credit approval, and terms vary by borrower, property and investor.

Who this tends to fit

Retirees living on investment and retirement accounts instead of a paycheck
People who sold a business or property and hold the proceeds
Early retirees and people between careers with significant savings
Self-employed owners with modest taxable income but strong balances
Borrowers who want to add asset-based income to a pension or Social Security
Heirs who received liquid assets and want to buy or refinance a home

Before you call

Recent statements for each checking, savings, brokerage and retirement account
A list of who owns each account and whether it is pledged or borrowed against
Retirement plan details showing whether you can access the funds
A closing statement or paper trail for any large deposits
Award letters or statements for Social Security, pensions or other income
A plan for how much you will put down and keep in reserves

Asset Depletion Mortgages by state

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Common questions

What is an asset depletion loan?

An asset depletion loan is a mortgage that qualifies you based on your savings and investments rather than employment income. The lender verifies eligible assets, subtracts what you need to close, and divides the rest by a number of months the program sets to create a monthly income figure. You may qualify even with little or no regular income, subject to credit approval.

Do I have to withdraw money every month?

No. The calculation measures your capacity to pay from assets; it does not require you to draw down your accounts on a schedule. You can pay the mortgage from any source, including investment returns, a pension or Social Security. The lender simply wants confidence that your assets are large enough to support the payment over time.

Which assets count for an asset based mortgage?

Cash accounts usually count in full. Stocks, bonds and mutual funds are commonly counted at a reduced value, and retirement accounts may be counted after allowing for taxes or penalties if you can access them. Assets that are pledged, illiquid or hard to value, such as business equity or real estate, are generally excluded. Each program sets its own list.

Do Fannie Mae and Freddie Mac allow asset depletion?

Both have their own asset-based qualifying guidance. Fannie Mae allows certain employment-related assets, such as retirement accounts and severance, to be used as qualifying income. Freddie Mac allows certain retirement, bank and securities accounts to be used as a basis for repayment. Both carry conditions on property, transaction and assets, and they tend to be narrower than non-QM programs.

Can I combine asset depletion with other income?

Often, yes. Many programs let you add asset-based income to Social Security, a pension, annuity payments, rental income or part-time earnings. Combining sources can help you reach the income figure you need without counting every asset. Tell your loan officer about every source so they can choose a program that allows the mix you have.

Are there tax consequences to using retirement funds this way?

Qualifying with retirement assets does not by itself trigger a withdrawal or a tax event, because the calculation is on paper. If you later withdraw funds to make payments, taxes and penalties may apply depending on the account and your age. How that affects you is a personal question, so talk to a tax professional before relying on retirement funds.

Asset Depletion and Asset-Based Mortgages