What You Need to Know About Asset Depletion Mortgages

What Is an Asset Depletion Mortgage?

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An asset depletion mortgage converts verified liquid assets into monthly qualifying income. We apply haircuts to eligible accounts, subtract cash to close and reserves, then divide what remains by 84 months to produce a qualifying income figure. The program uses a 43% DTI cap and follows non-QM rules.

This is built for borrowers with strong balances but limited traditional income documentation - retirees, high‑net‑worth clients, or self‑employed borrowers in a light year. Assets are not pledged; we treat a portion of verifiable, liquid funds as income for underwriting.

Key Takeaway: Qualify by turning liquid assets into monthly income using Lendz’s 84‑month divisor, subject to a 43% DTI cap and clear eligibility rules.

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Who Benefits: Broker Use Cases You’ll Recognize

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Borrowers who can meet credit and DTI but lack clean W‑2 or tax‑return income often benefit.

• Retirees or near‑retirees delaying Social Security/RMDs.
• High‑net‑worth clients post‑liquidity event or inheritance.
• Self‑employed or seasonal earners with volatile AGI.
• Buyers with large liquid balances who want wholesale flexibility.

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How Lendz Calculates Qualifying Income from Assets

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We treat unrestricted, liquid assets as income for qualification, then convert balances into a monthly figure.

Exact math:

• Start with Total Assets Eligible for Depletion (after haircuts).
• Subtract down payment.
• Subtract out‑of‑pocket closing costs.
• Subtract required reserves.
• Divide the remainder by 84 months.

The result is the monthly qualifying income from assets. Maximum DTI is 43%.

Minimum eligible assets when using asset depletion as the sole income source: the lesser of $1,000,000 or 150% of the loan amount. When used to supplement other income, the minimum asset requirement is waived.

Example:

• Eligible assets after haircuts: $1,300,000
• Cash to close: $180,000; Required reserves: $60,000
• Base = $1,300,000 − $180,000 − $60,000 = $1,060,000
• $1,060,000 ÷ 84 ≈ $12,619 monthly qualifying income

Note: Divisors vary across the market (many non‑QM programs use 60–84 months). Always check lender rules.

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Eligible Assets and Haircuts (What Counts and At What Percentage)

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We count liquid, accessible assets and apply standard percentages to reflect market/access risk:

• 100%: Checking, savings, money markets, and U.S. Treasuries maturing under one year; 100% of life insurance cash surrender value (less loans).
• 70%: Stocks, bonds, mutual funds in taxable brokerage accounts.
• Retirement accounts: 70% if borrower is at least age 59½; 60% if younger than 59½.
• Trusts: Revocable trusts where the borrower is trustee may qualify; irrevocable trusts may qualify only if the borrower is beneficiary with immediate access. The same percentages above apply.

All assets must be liquid and available with no penalties for access. Extra documentation may be requested to verify source and nature of funds.

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Ineligible Assets and Common Mistakes to Avoid

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Screen these early:

• Not permitted for qualification: gift funds; business assets; foreign assets; assets held by a non‑occupant co‑borrower. Most trust assets are not eligible unless they meet the narrow trust rules above.
• Other exclusions: cash‑out proceeds from this transaction; equity in real estate; privately traded or restricted/non‑vested stock; assets held in a business name; irrevocable trusts where the borrower is not the beneficiary; charitable giving trusts; donor‑advised funds.
• Crypto: Not eligible for depletion income. It may work for down payment, closing, or reserves under separate rules.

Broker tip: Confirm ownership/vesting, penalties, lockups, or encumbrances before assuming an asset qualifies.

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Underwriting Guardrails Brokers Must Know

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Think of these as rails for a clean submission:

• Maximum DTI: 43%.
• Minimum credit score: 680 (see matrices for any exceptions).
• Anyone on an account used to qualify must be on the Note and Mortgage.
• Ability‑to‑Repay (ATR) applies to non‑QM loans; income must be supported by reliable third‑party records.
• LTV/CLTV caps, pricing, and program‑specific limits follow Lendz product matrices.
• Funding discretion: Meeting guidelines is necessary but not a commitment to fund.
• Conforming comparison: Agencies permit asset‑based income but often require at least three years of continuance, which differs from many non‑QM methods.

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Documentation and Verification Checklist

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Keep this list handy so you can pre‑package the file:

• Most recent three-monthly statements, a quarterly statement, or a VOD for each account used.
• 90‑day seasoning for assets (exception for documented home‑sale proceeds).
• Proof funds are liquid and available without penalties; provide additional documentation if requested to verify source of funds.
• For trust assets, supply documents showing the borrower’s role and immediate access if applicable.

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How to Structure a Winning Asset Depletion Scenario with Lendz

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• Start with a paper drawdown of assets. Apply haircuts, subtract cash to close and reserves, then divide by 84.
• Test the resulting monthly income against the 43% DTI cap.
• Blend with other income sources if available; when supplementing, the minimum asset rule is waived.
• Clean up ownership/vesting early. Anyone on an account used to qualify must be on the Note and Mortgage.
• Exclude crypto for depletion. Coordinate with your Lendz AE to confirm current matrices and documentation before pricing.

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Asset Depletion FAQs for Mortgage Brokers
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Q: Do borrowers have to liquidate assets to qualify?
A: No. It’s a paper drawdown; the borrower keeps control of funds.

Q: Can I combine asset depletion with Social Security, pensions, or self‑employed income?
A: Yes. You can blend income sources. When supplementing, the minimum asset rule is waived.

Q: What assets and percentages are used?
A: Cash/MM/short‑term UST at 100%; taxable brokerage at 70%; retirement at 70% (age ≥59½) or 60% (<59½); 100% of life insurance CSV.

Q: Is cryptocurrency eligible for depletion?
A: No. It’s ineligible for depletion, though it may be used for funds to close or reserves under separate rules.

Q: What are the credit score and DTI limits?
A: 680 minimum credit score and 43% maximum DTI.

Q: How is monthly income calculated?
A: Eligible assets (after haircuts) minus cash to close and reserves, divided by 84 months.

Q: Do trust assets ever qualify?
A: Revocable trusts with the borrower as trustee, or irrevocable trusts with the borrower as beneficiary and immediate access, may qualify with documentation.