Asset Depletion Loans

What Are Asset Depletion Loans?

Asset Depletion loans consider a borrower’s liquid assets, such as savings, stocks, bonds, and retirement accounts, as a means of income qualification. By calculating a monthly income based on these assets, lenders can offer mortgages to those who might not qualify through traditional income verification methods.

Our asset depletion loan can be used as a stand-alone income qualifier or in combination with the following loan programs:

• Bank Statement (12mo, 24mo)
• 1099
• P&L
• WVOE

Understanding the Asset Depletion Loan Process and Income Calculation

Asset Depletion loans may seem complex, but understanding the process can simplify your path to homeownership. This specialized loan type involves a series of steps that differ from traditional mortgage applications. We’ll guide you through each phase, helping you understand how your liquid assets are evaluated and converted into a qualifying income.

Assessment of Liquid Assets

The process starts with a review of your liquid assets, which can include bank accounts, stocks, bonds, mutual funds, and even retirement accounts. The goal is to gauge how much you have in readily accessible financial resources that can be turned into a form of income for loan qualification. The most recent 6 months asset documentation will be verified. The following adjustment factors will be applied to the asset values: cash in bank (100%), stocks (90%), bonds (90%), IRAs (80%), 401k (80%), mutual funds (90%), and/or retirement accounts (80%). So, for example, if you have $500,000 in your 401k, the total value of assets that we will use for qualifying purposes will be $400,000.

Asset Depletion Formula

Asset Depletion loans make use a specific formula to convert your total liquid assets into a monthly income figure. The formula divides the total amount of qualifying assets by a set number of months. At Amres, the total allowable assets less required reserves are divided by 84 months to determine the qualifying monthly income. This income will be used in calculating the debt to income (DTI) ratio.

(Assets – Reserves) / 84 months = Income

For example, say we use the $400,000 of qualified assets from the previous example and are expecting a hypothetical mortgage payment of $2,000 per month. 6 months of reserves would be $12,000. So the calculation of qualifying income would look like:

($400,000 – $12,000) / 84 = $4,619.05

Debt-to-Income Calculation

The monthly qualifying income derived from the asset depletion formula is then added to any other income sources you may have and divided by your total debts. This debt-to-income ratio is used to determine your eligibility for the loan. Assuming you have no other debt, using the hypothetical income of $4,619.05 and hypothetical mortgage payment of $2,000 from our previous example, your debt-to-income ratio calculation would look like:

$2,000 / $4619.05 = 43.30% DTI

Standard Loan Evaluation

After establishing your income, traditional mortgage criteria come into play. We will evaluate your credit score, assess your debt-to-income ratio, and review the property you intend to purchase to ensure it meets minimum lending criteria.

Benefits of Asset Depletion Loans

When it comes to securing a mortgage, traditional income streams like salary or hourly wages are often the focal points. However, Asset Depletion loans open up a new avenue. These loans are particularly beneficial for those with substantial liquid assets but unconventional income sources. Let’s look at the advantages of this specialized mortgage offering.

• Enhanced Accessibility: Asset Depletion loans serve as a lifeline for borrowers who might find traditional loan options limiting. This is particularly true for retirees as they may have considerable assets but no income from employment.
• Flexible Qualification Standards: Traditional loans often require stringent income verification processes, such as looking at W-2 forms or pay stubs. Asset Depletion loans, on the other hand, offer flexibility by considering your liquid assets as an alternate form of income. This makes it easier for freelancers, business owners, or anyone with irregular income patterns to qualify. Additionally, our asset depletion loan can be paired with other loan programs to make it even easier to qualify.
• Streamlined Approval Process: Because we take into account your substantial assets, the approval process can often be smoother and quicker. The focus on assets can reduce the need for extensive income verification. This makes it easier to progress from application to approval.
• Higher Loan Amounts: With traditional loans, your borrowing capacity is often directly tied to your income. Asset Depletion loans consider your liquid assets, potentially allowing for higher loan amounts. This can be especially beneficial for borrowers looking to invest in high-value properties.

Who Should Consider Asset Depletion Loans?

Asset Depletion loans are not one-size-fits-all; they are most useful to certain types of borrowers who have specific financial profiles. If you have a large amount of liquid assets but find traditional income verification methods to be a barrier, this loan type may be your key to homeownership. Let’s look at who stands to benefit the most from this specialized mortgage option.

• Retirees and Near-Retirees: Those in retirement or nearing that stage often have accumulated assets but may face a reduction in regular income. Asset Depletion loans offer an opportunity to use those savings or investment accounts to qualify for a mortgage.
• High-Net-Worth Individuals: If you have a lot of wealth in the form of liquid assets but have an irregular income flow, Asset Depletion loans can be an excellent tool. These loans offer a way to translate your financial standing into mortgage eligibility without the need for conventional income documentation.
• Self-Employed Professionals: Entrepreneurs, freelancers, and independent contractors often face challenges in providing conventional income proof. With Asset Depletion loans, your liquid assets serve as an alternative to traditional income verification methods, leveling the playing field.
• Real Estate Investors: Those looking to diversify their investment portfolios by acquiring additional properties may find Asset Depletion loans a convenient option. It allows investors to qualify based on their asset pool, thereby potentially enabling purchases that might be unreachable with traditional loans.
• Seasonal Workers: For individuals with income that fluctuates due to seasonal work, Asset Depletion loans can provide a consistent basis for mortgage qualification by focusing on liquid assets instead of erratic income streams.

Requirements for Asset Depletion Loans

Obtaining an Asset Depletion loan involves more than just having a large sum of liquid assets. There are several additional qualifications to meet. These requirements ensure that borrowers not only have the assets to leverage but also possess the financial responsibility to manage a mortgage. Let’s outline the key criteria you’ll need to satisfy to qualify for an Asset Depletion loan.

• Sufficient Liquid Assets: The foundation of this loan type is, of course, your liquid assets. We will require verification of sufficient funds in the form of bank statements, stock portfolios, retirement accounts, or other liquid assets.
• Responsible Credit History: A robust credit score is another important qualifier for most mortgage loans, and Asset Depletion loans are no exception. Your credit history should indicate responsible borrowing behavior, timely payments, and a low amount of bad debt.
• Debt-to-Income Ratio: While the focus is on your assets, your debt-to-income (DTI) ratio is of utmost importance. This ratio measures your monthly debts against your calculated monthly income (which, in this case, includes the income derived from your assets). A lower DTI often translates to better loan terms.
• Property Evaluation: Just like with traditional mortgage loans, the property you’re planning to purchase will undergo an appraisal. Appraisals ensure that the property is sound and its value aligns with the loan amount you’re seeking.
• Down Payment: Even though you’re leveraging your assets to qualify for the loan, you will still have to have a down payment. The percentage may vary based on your financial situation.

How to Apply for an Asset Depletion Loan

Apply Online

1. Visit the website: Go to the online mortgage application portal at Amres.com.
2. Complete the application: Answer some questions about your homeownership goals and personal information.
3. Gather Documentation: Prepare necessary financial documents, such as asset statements and tax returns.
4. Loan Processing and Approval: Amres will process the loan, conduct the appraisal, and provide a decision on approval.
5. Closing: After approval, you’ll proceed to closing. There, you’ll finalize the loan and become the proud owner of your new home.

Apply over the phone

1. Contact an Amres Loan Officer: Start by connecting with an Amres loan officer to discuss your needs and options.
2. Gather Documentation: Prepare necessary financial documents, such as asset statements and tax returns.
3. Complete Application: Your loan officer will guide you through the application process, making sure all details are accurately provided.
4. Loan Processing and Approval: Amres will process the loan, conduct the appraisal, and provide a decision on approval.
5. Closing: After approval, you’ll proceed to closing. There, you’ll finalize the loan and become the proud owner of your new home.

Conclusion

Asset Depletion loans unlock the potential of your liquid assets, transforming them into a viable pathway to home financing. This innovative approach provides opportunities for individuals with non-traditional income sources to attain their dream of homeownership.

At Amres, we understand the importance of personalized home financing solutions. Our dedicated team of has the expertise to guide you through the Asset Depletion loan process. Contact us today to explore this unique mortgage option, and let’s turn your assets into the key to your new home.