Asset depletion is a method for calculating monthly income by dividing a borrower’s total assets by a set number of months. The borrower is not required to cash in their assets as they're only used to demonstrate an ability to make the mortgage and housing payments.
Borrowers who use an asset depletion program to qualify do not need to show any source of income or employment. They can instead rely on asset depletion calculations based on a combination of cash, retirement, and investment monies divided by 360 payments. Assets are generally qualified with 100% of cash accounts and 70% of retirement and investment accounts (100% of retirement funds may be used if the borrower is over 59 ½ years old). For example, if a 45 year old borrower has $2,000,000 in liquid assets, and another $1,000,000 in retirement and investment funds, then their qualifying monthly income would be $7,500 ($2,000,000 + $700,000 = $2,700,000; divided by 360 = $7,500).
Asset rich individuals who are unable to provide a qualifying employment history or sufficient income may find this as an ideal solution. However, not all loan programs allow asset depletion as an acceptable income source. Please call us today to learn more about asset depletion and determine whether this method will work for your specific transaction.
-The Kavanewsky TeamShare on Twitter Share on Facebook