Asset Depletion Loans: Qualify With Your Savings

A retired couple with $1.2 million in savings and $3,000 a month in Social Security can be turned down for a $400,000 mortgage. The money is there. The paycheck is not, and most mortgage math runs on paychecks.

An asset depletion loan, also called an asset utilization or asset dissipation loan, fixes that. The lender treats your liquid assets as if they were being paid out to you monthly, and qualifies you on that imputed income. You do not have to sell anything or set up withdrawals. Fannie Mae and Freddie Mac both allow a version of it, and non-QM lenders offer more flexible versions with shorter divisors and fewer restrictions.

How the formula works

Every lender uses a variation of the same four steps:

1. Total your eligible assets: checking, savings, money market, CDs, stocks, bonds, mutual funds, and retirement accounts
2. Subtract the down payment, closing costs, and required reserves for the new loan
3. Apply any discounts: retirement accounts are often counted at 60% to 70% if you are under 59½, and some lenders haircut stocks and bonds
4. Divide what remains by the lender's term in months to get your qualifying monthly income

Example: you have $1,000,000 in eligible assets. You put $160,000 toward the down payment and closing costs, leaving $840,000. At an 84-month divisor, qualifying income is $840,000 ÷ 84 = $10,000/month. Add Social Security, pension, or any other documented income on top of that.

The divisor is the number that matters most. Agency programs through Fannie Mae and Freddie Mac typically divide by 240 or 360 months, which produces a much smaller monthly figure. Non-QM lenders commonly use 60, 84, or 120 months. The same $840,000 yields $2,333/month at 360 months and $14,000/month at 60 months.

Typical loan requirements

Requirements vary by lender, but most fall into these ranges:

• Eligible assets: liquid accounts you own outright; business accounts and assets held in someone else's name usually do not count
• Asset minimum: many non-QM programs want at least $500,000 to $1,000,000 remaining after closing; agency versions have no fixed floor but the long divisor requires a lot
• Seasoning: assets generally need to be in your accounts for 2 to 6 months; recent large deposits must be explained
• Credit score: 660 to 680 minimum; 720+ for the best pricing
• Down payment: 20% to 30%, with a lower down payment available for stronger profiles
• Debt-to-income ratio: typically up to 43% to 50%, calculated on the imputed income plus any other income
• Divisor: 60 to 120 months with non-QM lenders; 240 to 360 months with agency programs
• Property types: primary residence, second home, and investment property with most non-QM lenders
• Loan purpose: purchase, rate-term refinance, or cash-out refinance
• Interest rate: agency versions price like conventional loans; non-QM versions run roughly 0.5% to 1.5% higher

Agency vs. non-QM asset depletion

There are two paths, and the right one depends on how much you have and how much house you want.

• Agency (Fannie Mae / Freddie Mac). Conventional pricing and no rate premium, but a 240 or 360 month divisor and stricter rules about which accounts count. Works well when you have a very large balance or only need a modest boost on top of pension and Social Security income.
• Non-QM. A 60 to 120 month divisor that turns the same assets into far more qualifying income, plus more flexibility on retirement accounts, second homes, and investment properties. Costs a rate premium and usually a larger down payment.

A lender who offers both will often run your file both ways. Ask to see the qualifying income under each before you decide.

Who asset depletion loans work well for

• Retirees relocating or downsizing who want to keep investments working rather than paying cash
• Early retirees living off a portfolio before Social Security or pension income starts
• Recent sellers of a business or home sitting on proceeds but with little documented income this year
• High-net-worth buyers whose income is mostly capital gains, trust distributions, or irregular bonuses
• Buyers between jobs who have substantial savings and a gap in employment history

When an asset depletion loan probably isn't the right fit

• Your pension, Social Security, or employment income already qualifies you. The standard loan will be simpler and cheaper.
• Most of your net worth is in real estate equity, a business, or an annuity you cannot liquidate. Those are not counted.
• Your assets arrived recently and cannot be sourced. A large unexplained deposit will be excluded.
• You are close to the asset minimum. Spending it down to qualify leaves you with no cushion after closing.

Key risks to understand

The divisor can cut your purchasing power in half. A 120-month divisor produces 30% less income than an 84-month one on the same balance. Confirm the divisor in writing before you start shopping.

Retirement account haircuts add up. If most of your wealth is in a 401(k) and you are under 59½, a 60% to 70% count can shrink $1,000,000 to $650,000 before the math even starts.

Market swings matter during underwriting. Lenders use the most recent statement. A sharp drop in your brokerage balance between application and closing can force a re-qualification.

Guidelines vary widely. Divisors, discounts, and minimums are not standardized outside the agency programs. Two lenders can look at the same statements and arrive at very different approvals. Shop at least two or three.

How to prepare before applying

• Gather two to three months of statements for every account you want counted
• Move any assets you plan to use into your own name at least 60 days before you apply
• Avoid large transfers between accounts during the statement window; each one needs a paper trail
• Ask each lender for their divisor, retirement account treatment, and asset minimum up front
• Decide whether a larger down payment is worth it; lowering the loan amount often matters more than squeezing out extra qualifying income
• Have a lender run the calculation before you make an offer so you know your number

Common questions