An asset depletion loan qualifies a borrower on what they own rather than what they earn. The lender takes eligible savings, retirement and investment balances, subtracts the money needed to close, and divides the rest by a set number of months. The result is treated as monthly income for the debt-to-income ratio.
What is an asset depletion loan?
An asset depletion loan is a mortgage where part or all of the qualifying income is calculated from assets instead of paychecks or business deposits. The lender assumes the borrower could draw the balance down evenly over a fixed period, and that monthly draw becomes the income figure the debt-to-income ratio is built on.
The idea fits people with large balances and small or irregular income: retirees who have not started distributions, people living off a sale, and owners between ventures. Nothing is actually withdrawn. The calculation is a test of whether the assets could carry the payment, not a plan the borrower must follow.
The three numbers behind it
Every asset depletion figure rests on three inputs:
- Eligible assets, the balances the lender agrees to count.
- Deductions, the money that will leave the accounts at closing plus any withdrawal penalty or haircut.
- The divisor, the number of months the remaining balance is spread across.
Change any one and the income changes. That is why two lenders can look at the same statements and reach very different income figures.
Accounts an asset depletion loan will count
An asset depletion loan counts money the borrower owns and can reach: deposit accounts, brokerage accounts and, under some programs, retirement accounts. It refuses assets the borrower cannot liquidate on demand. Each program writes its own list, so treat the table below as a starting point, then read the lender's guide for the file in hand.
| Asset | Counted? | Why |
|---|---|---|
| Checking and savings | Depends on the program | Fannie Mae's version counts them only when funded by an eligible employment-related asset |
| Brokerage stocks, bonds, funds | Depends on the program, sometimes with a haircut | Market value can fall before the borrower draws it |
| 401(k), IRA, SEP, Keogh | Yes under Fannie Mae, minus any penalty | Withdrawal may carry tax and penalty |
| Non-vested restricted stock, stock options | No | The borrower does not own them yet |
| Virtual currency | No under Fannie Mae | Ineligible under the agency topic |
| Real estate equity | No | Not liquid |
Brokerage accounts
Brokerage statements show holdings, not a simple balance, and lenders read them line by line to separate cash, listed securities and anything restricted. The post on brokerage statements for a mortgage explains what an underwriter checks on those pages.
Crypto holdings
Some borrowers who would like an asset depletion loan hold a share of their wealth in crypto. Fannie Mae's topic lists virtual currency as ineligible for this calculation. A borrower who wants that value counted usually has to sell, move the cash to a bank account and let it season. The post on using crypto for a down payment covers how that conversion is documented.
Joint ownership
Under Fannie Mae's rule, assets must be owned by the borrower alone, or any co-owner must also be a borrower on the loan. A spouse's separate brokerage account does not count unless the spouse joins the loan.
How does the divisor turn savings into asset depletion income?
The divisor is the number of months the lender spreads the net assets over. Monthly income equals net assets divided by the divisor. A smaller divisor gives a larger income figure. Fannie Mae divides by the loan's amortization term in months, so a 30-year loan uses 360. Non-QM lenders choose their own divisor.
What is subtracted first
Before dividing, the lender removes money that will not be there after closing. Under Fannie Mae's B3-3.4-06, Employment-Related Assets as Qualifying Income, net documented assets equal eligible assets minus the penalty for a full distribution, minus the funds used for the down payment, closing costs and required reserves. The topic's own example takes a $500,000 IRA, subtracts a $50,000 penalty and $100,000 for the down payment, closing costs and reserves, and divides $350,000 by 360 for $972.22 a month.
Haircuts on volatile assets
A non-QM program may apply a percentage haircut to securities or retirement balances to allow for market drops and taxes. The haircut is a lender choice, not a rule. Ask for the program's haircut table before you run a scenario, because a 30% haircut and a 0% haircut on a large brokerage account can change qualifying income by thousands of dollars a month.
Why the divisor matters more than it looks
On a $1,000,000 net balance, a 360-month divisor gives $2,778 a month. An 84-month divisor, used here only as an example, gives $11,905. Same borrower, same statements, a fourfold difference. When a borrower asks why one lender approved and another did not, the divisor is usually the answer.
Fannie Mae's employment-related assets rule versus non-QM asset depletion
Fannie Mae's employment-related assets rule is a narrow agency version of asset depletion. It counts only assets that came from employment, such as retirement accounts, severance and lump-sum retirement payouts, and caps loan-to-value. Non-QM asset depletion programs are broader, count more asset types and set their own divisors and limits.
What the Fannie Mae version allows
The B3-3.4-06 topic sets these limits:
- Maximum LTV, CLTV or HCLTV of 70%, or 80% if the asset owner is at least 62 at closing
- Purchase and limited cash-out refinance only
- Principal residence and second home only
- Eligible sources: non-self-employed severance, non-self-employed lump-sum retirement distributions, and 401(k), IRA, SEP or Keogh accounts
- Ineligible: stock options, non-vested restricted stock, lawsuit proceeds, lottery winnings, real estate sale proceeds, inheritance and divorce proceeds
- The borrower must have an unqualified and unlimited right to request a distribution of all funds in a retirement account
The topic also says no minimum income history is required and income continuance does not need to be documented.
What non-QM programs often change
Private programs write their own terms. A given program may count inheritance and sale proceeds, accept investment properties, use a shorter divisor, or add asset-based income on top of other income. It may also set a minimum asset amount and price above an agency loan. None of those terms are standard, so quote from the lender's current matrix, not from memory.
Borrowers an asset depletion loan suits, and borrowers it fails
An asset depletion loan suits a borrower whose balance sheet is strong and whose income on paper is weak. It fails borrowers whose wealth is tied up in property or a business, whose assets are about to be spent, or whose income already qualifies on its own.
Good fits
- A retiree with a large IRA who has not started required distributions
- An owner who sold a business and holds the proceeds in a brokerage account
- A borrower on a career break with years of savings
- Someone whose tax returns show low income because of large deductions, with substantial liquid assets
Poor fits
- A borrower with most wealth in rental property equity, which is not liquid
- A business owner whose cash sits inside the operating account and is needed to run the company
- A borrower about to use most of the assets for the purchase itself, leaving little to divide
- A borrower who already qualifies on wages, where a full-doc loan will price better
The reserve trap
Assets used for income can also be asked to cover reserves and the down payment. Under Fannie Mae's formula, those amounts are subtracted before dividing, so the same dollar cannot be counted twice. Borrowers sometimes expect to use one balance for everything and are surprised when the income figure shrinks after closing funds come out.
Statements an asset depletion underwriter reads
An asset depletion underwriter needs statements that prove the assets exist, belong to the borrower and can be reached. For retirement accounts that means the most recent statement showing what the account holds. For deposit and brokerage accounts it means full statements with the institution, the account holder, the period and the ending balance.
Statements, not printouts
A screen printout of activity rarely satisfies an underwriter, because it often leaves out the account holder's name or the period. The post on transaction history versus bank statement lists what a printout needs before a lender will take it.
What to look for across the months
Even though no paycheck is being counted, the statements still tell a story. An underwriter checks for:
- Large deposits that suddenly built the balance, which need a source
- Regular withdrawals that suggest the borrower is already living off the assets faster than the divisor assumes
- Loans against the account, such as a 401(k) loan, which reduce what is available
- Margin balances in a brokerage account, which are debts against the holdings
For a severance or lump-sum payout, Fannie Mae asks for the employer's distribution letter or Form 1099-R and the deposit into a verified account. A tool such as TrueBankFlow can sort months of deposit-account activity into categories and flag the large inflows, which shortens the hunt for the deposits that built the balance.
An asset depletion income calculation with example numbers
An asset depletion income calculation runs from gross balances to a monthly figure in five steps. The numbers below are invented to show the arithmetic. They use Fannie Mae's structure with a 360-month divisor, then repeat the last step with a shorter divisor to show how a non-QM program might differ.
The borrower
A 64-year-old borrower is buying a $500,000 principal residence with $150,000 down. She holds an IRA and a rollover 401(k). Closing costs are $12,000 and the lender requires $20,000 in reserves.
The steps
| Step | Example amount |
|---|---|
| IRA balance | $620,000 |
| Rollover 401(k) balance | $280,000 |
| Gross eligible assets | $900,000 |
| Less distribution penalty (none at her age, example) | $0 |
| Less down payment | -$150,000 |
| Less closing costs | -$12,000 |
| Less required reserves | -$20,000 |
| Net documented assets | $718,000 |
| Divided by 360 months | $1,994 per month |
Her loan-to-value is 70%, inside Fannie Mae's limit, and she is over 62, so 80% would also be allowed.
The same assets, a shorter divisor
If a non-QM lender used, for example, 120 months instead of 360, the same $718,000 would produce $5,983 a month. The borrower qualifies for a much larger payment. She also pays the non-QM rate. Whether that trade is worth it depends on how far the 360-month figure falls short.
What to check before quoting
Confirm the divisor, any haircut, whether retirement balances count at full value, and whether income from a pension or Social Security can be added on top. Then run the debt-to-income ratio with all of it. If you want the deposit side of these statements laid out month by month, get started with TrueBankFlow.