Asset Depletion Mortgage: Qualify Using Your Savings

If you have substantial savings but limited traditional income—whether you're retired, between careers, or living off investments—an asset depletion mortgage could unlock homeownership or refinancing opportunities that standard income qualification would deny you.

What Is an Asset Depletion Mortgage?

An asset depletion mortgage is a loan program that qualifies you based on your liquid assets rather than employment income. Lenders calculate a theoretical monthly income by dividing your total qualifying assets by the loan term (typically 360 months for a 30-year mortgage), then use this figure for [debt-to-income ratio](/blog/dti-ratio-explained) calculations.

This approach recognizes that substantial savings can support mortgage payments just as reliably as a paycheck—sometimes more reliably. Instead of asking "How much do you earn?" the lender asks "How much do you have?"

How Asset Depletion Calculation Works

The basic formula is straightforward:

Qualifying Monthly Income = (Total Qualifying Assets ÷ Loan Term in Months) × Percentage Factor

The percentage factor typically ranges from 70-100% depending on the lender and asset type. Here's a real example:

You have $600,000 in qualifying assets and apply for a 30-year mortgage (360 months):

• $600,000 ÷ 360 = $1,667 per month
• If lender uses 100% factor: $1,667 qualifying income
• If lender uses 70% factor: $1,167 qualifying income

This calculated income then gets plugged into standard debt-to-income calculations. With $1,667 monthly qualifying income and a 43% DTI limit, you could support:

• $1,667 × 0.43 = $717 in total monthly debt obligations
• Minus existing debts (car payment, credit cards, etc.)
• Remainder available for mortgage payment (principal, interest, taxes, insurance)

Qualifying Assets

Not all assets count equally for asset depletion programs:

Fully Qualifying Assets (100% Value)

• Checking and savings accounts
• Money market accounts
• Certificates of deposit (CDs)
• Taxable investment accounts (stocks, bonds, mutual funds)
• Vested company stock or stock options

Partially Qualifying Assets (60-70% Value)

• Traditional IRAs (discounted for tax liability)
• 401(k) and 403(b) plans (discounted for early withdrawal penalties)
• Roth IRAs (often 100% since withdrawals are tax-free)

Non-Qualifying Assets

• Primary residence equity
• Investment property equity (sometimes can be included at lender discretion)
• Retirement accounts you're actively contributing to from employment
• Personal property (cars, jewelry, art)
• Business interests without clear liquidity

The logic is simple: lenders want assets you could realistically access to make mortgage payments. Your [home equity](/blog/equity-vs-appreciation) doesn't help because you're living in it. Your car isn't liquid enough.

Ideal Candidates for Asset Depletion Mortgages

Several situations make asset depletion programs particularly attractive:

Retirees: You've accumulated substantial retirement savings but don't have employment income or sufficient Social Security to qualify conventionally. Asset depletion converts your nest egg into qualifying income.

Early Retirees: If you've retired at 50 with $2 million saved, you have decades before Social Security begins. Asset depletion lets you buy or refinance without waiting until 62.

Divorced Individuals: After receiving a settlement that includes cash assets but facing reduced household income, asset depletion helps you purchase a new home using settlement funds.

Recently Unemployed: Between careers or taking sabbatical time with substantial savings to support yourself, asset depletion provides financing until you return to traditional employment.

Trust Fund Recipients: Living off investment income or trust distributions that don't appear as employment income, asset depletion recognizes your financial capacity.

Entrepreneurs Post-Exit: After selling a business, you have significant liquid assets but no longer show business income on tax returns.

Advantages of Asset Depletion Loans

Income Without Employment: Qualify for mortgages without W-2s, pay stubs, or tax returns showing earned income.

Use Existing Resources: Instead of liquidating investments to buy property outright, maintain liquidity while getting financing.

Competitive Rates: Asset depletion programs through reputable lenders offer rates comparable to conventional mortgages, unlike many alternative [documentation](/blog/heloc-documentation-requirements) programs.

Tax Efficiency: Keeping investments intact rather than cashing out can minimize capital gains taxes and preserve long-term growth potential.

Retirement Planning: Secure housing with a mortgage payment rather than depleting assets completely, maintaining funds for other retirement needs.

Fast Qualification: The calculation is mathematical and straightforward—if you have sufficient assets, qualification is clear-cut without subjective income analysis.

Disadvantages and Considerations

High Asset Requirements: Qualifying typically requires $500,000-$1,000,000+ in liquid assets depending on the desired loan amount, far more than most borrowers have.

Reserves Needed Beyond Calculation: Lenders require 3-12 months of reserves in addition to the assets used for income calculation, meaning you can't deploy every dollar.

Limited Lender Availability: Fewer lenders offer asset depletion programs compared to conventional mortgages, requiring more search effort.

Documentation Intensive: You'll need recent statements for all accounts, proof of asset ownership, and documentation that assets are liquid and accessible.

Conservative Valuations: Stock portfolios get counted at current value, which can fluctuate. Market downturns reduce your qualifying assets.

Not for Small Purchases: The program makes sense for substantial home purchases, not entry-level properties where conventional or FHA financing works fine.

Asset Depletion vs. Alternative Programs

Understanding how asset depletion compares to other options helps you choose the right path:

Asset Depletion vs. Bank Statement Loans: Bank statement programs qualify self-employed borrowers using deposits, while asset depletion works for anyone with substantial savings. Bank statement loans require ongoing income; asset depletion doesn't.

Asset Depletion vs. Stated Income: True stated income (no verification) loans largely disappeared after 2008. Modern asset depletion requires full documentation of assets, making it much more legitimate and widely available.

Asset Depletion vs. Investment Income: If your assets generate dividends and interest, you might qualify using actual investment income instead. Run both calculations—sometimes investment income alone qualifies you at better terms.

Asset Depletion vs. Conventional with Assets: Some conventional programs allow you to "gross up" tax-free investment income (multiply by 25% to account for no taxes) or count a portion of assets as reserves to improve DTI. Explore these before asset depletion programs.

Typical Program Requirements

Beyond assets, expect these standard requirements:

Credit Score: Minimum scores typically range from 680-720, higher than many portfolio programs since lenders want to offset asset depletion risk with strong credit.

Down Payment: Expect 10-25% down depending on loan amount and overall profile. Larger down payments improve terms.

Property Type: Most programs accept primary residences and second homes; investment property approval is less common and more restrictive.

Loan Limits: Many lenders cap asset depletion loans at conforming limits ($766,550 in most areas for 2026), though some offer jumbo asset depletion programs.

Debt-to-Income: Standard DTI limits of 43-45% apply using your calculated asset depletion income.

Reserves: Lenders require 6-12 months of reserves after closing, separate from the assets used for income calculation.

Finding Asset Depletion Lenders

Asset depletion programs require targeted shopping:

[Portfolio Lenders](/blog/portfolio-lending-guide): Banks and credit unions that keep loans in-house often offer the most flexible asset depletion terms.

Non-QM Lenders: Specialized lenders like Angel Oak, Deephaven, and Acra Lending feature asset depletion as part of their non-QM product suites.

Private Banks: If you have significant assets under management with a wealth management firm, ask about mortgage programs. Private banks reward total relationship value.

Mortgage Brokers: Experienced brokers know which lenders offer asset depletion and can match your profile to the best programs.

Credit Unions: Member-owned credit unions, especially those serving retiree populations, may have more accessible asset depletion options.

Maximizing Your Asset Depletion Qualification

Strategic moves can strengthen your application:

Consolidate Accounts: Gather assets into fewer accounts with clear documentation rather than spreading them across dozens of statements to track.

Time Your Application: Apply when markets are strong and your portfolio value is high, maximizing your calculated income.

Show Stability: Assets held in accounts for 2+ months demonstrate seasoning. Recent large deposits may require sourcing documentation.

Consider Asset Mix: If you have significant IRA balances that only count at 60-70%, supplementing with liquid accounts that count at 100% improves your calculation.

Boost Credit: With less income verification to lean on, strong credit (740+) becomes more important. Pay down credit cards and resolve any collections.

Reduce Existing Debt: Since qualifying income may be modest compared to your assets, minimizing car payments and other obligations helps your DTI.

Real-World Scenarios

The Early Retiree: James retired at 55 with $1.8 million in 401(k) and IRA accounts. Using asset depletion at 70% factor:

• $1,800,000 × 0.70 = $1,260,000 qualifying assets
• $1,260,000 ÷ 360 = $3,500 monthly income
• At 43% DTI = $1,505 available for housing payment
• Purchased a $350,000 retirement home with 20% down

The Inheritance Recipient: After her parents passed, Sarah received $900,000 in liquid assets but earns only $40,000 annually. Asset depletion added:

• $900,000 ÷ 360 = $2,500 monthly qualifying income
• Combined with her $3,333 employment income = $5,833 total
• At 43% DTI = $2,508 available for housing
• Upgraded to a $450,000 home from her starter condo

The Post-Sale Entrepreneur: Marcus sold his business for $2.5 million, keeping $1.5 million liquid after taxes. Taking a year off before his next venture:

• $1,500,000 ÷ 360 = $4,167 monthly income
• At 43% DTI = $1,792 available for housing
• Purchased a $550,000 home with 25% down while planning his next company

Combining Asset Depletion with Other Income

You don't need to rely solely on asset depletion if you have some traditional income:

Social Security + Assets: Combine Social Security income with asset depletion for retired borrowers who need just a bit more qualifying income.

Part-Time Work + Assets: Supplement part-time employment income with assets to reach necessary DTI levels.

Investment Income + Asset Depletion: Use actual dividends and interest as income, then add asset depletion if you're still short.

Pension + Assets: Pensions provide base income, with assets filling any gaps in qualification.

This hybrid approach often yields better terms than pure asset depletion since lenders see multiple income sources.

Tax Implications

While asset depletion uses a theoretical income calculation, understand the actual tax implications:

No Tax on Calculation: The calculated income is just for loan qualification—you don't owe taxes on it since you're not actually withdrawing the money.

Withdrawal Taxes: If you do need to tap retirement accounts for mortgage payments, you'll face ordinary income taxes plus potential early withdrawal penalties before age 59½.

Capital Gains: Selling taxable investments to make payments creates capital gains tax liability on appreciated positions.

Tax Planning: Work with a tax advisor to create a tax-efficient withdrawal strategy if you'll rely on assets for payments, potentially favoring Roth accounts and long-term holdings.

Frequently Asked Questions

How much in assets do I need for an asset depletion mortgage?

Most borrowers need at least $500,000-$1,000,000 in qualifying assets, depending on the desired loan amount and existing debts. Calculate backward from your housing goal: if you need $2,000 monthly qualifying income, you'll need $720,000 in assets ($2,000 × 360 months). Add reserves required after closing, typically 6-12 months of payments.

Can I use my IRA or 401(k) for asset depletion?

Yes, retirement accounts are the most common assets used for asset depletion. However, they typically count at only 60-70% of value to account for taxes and potential early withdrawal penalties. Roth IRAs often count at 100% since distributions are tax-free. You don't actually withdraw the money—it's just used for qualification calculations.

Do I have to liquidate my assets to qualify?

No, asset depletion loans use your assets for income calculation only. You don't need to liquidate anything unless you choose to make payments from those accounts. Many borrowers have other income sources (Social Security, pensions, investment income) and use assets purely for qualification purposes.

What interest rates can I expect with asset depletion?

Rates typically match conventional mortgages or run 0.25-0.75% higher, depending on the lender and your overall profile. Borrowers with excellent credit, large down payments, and substantial excess assets get the best rates. Asset depletion programs are far more competitive than hard money or alternative documentation loans.

Can I use asset depletion for investment properties?

Some lenders offer asset depletion for investment properties, but it's less common and more restrictive. Expect higher down payments (30%+), more reserves required, and potentially higher rates. Most asset depletion programs focus on primary residences and second homes.

How long does asset depletion mortgage approval take?

Expect 30-45 days for a typical [asset depletion loan](/blog/non-qm-loan-guide). The process requires gathering statements for all accounts, verification of asset ownership and liquidity, and manual underwriting review. Start early and work with a lender experienced in these programs to avoid delays.

Will the lender require me to keep assets with them?

Some lenders offer rate discounts if you move assets under their wealth management, but it's rarely required. Portfolio lenders and private banks most commonly make these offers, potentially saving 0.25-0.50% on your rate in exchange for the relationship.

What happens if my assets decline during the application process?

Lenders use asset values at the time of application and final verification before closing. Significant market declines could affect your qualification. If possible, time your application during stable or rising markets, and maintain asset levels throughout the process. Some lenders allow you to add additional accounts if values decline.

Is Asset Depletion Right for You?

Asset depletion mortgages serve a specific but important niche—borrowers with substantial wealth but non-traditional income. If you have the required assets, these programs offer legitimate, competitively priced financing without forcing you to liquidate investments or wait years for conventional income qualification.

The key considerations are:

1. Sufficient Assets: Do you have $500,000+ in qualifying liquid assets?
2. Reserves: Can you meet reserve requirements beyond the calculation?
3. Alternative Options: Would actual investment income, pension, or Social Security alone qualify you?
4. Long-Term Plan: How will you make payments—from the assets, other income, or both?

For many retirees, early retirees, and post-liquidity-event individuals, asset depletion provides the perfect bridge to homeownership or refinancing goals that traditional employment-based qualification would prevent. Work with an experienced lender, understand the math, and ensure the approach aligns with your overall financial strategy.

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