Why It Matters
You don't need a paycheck to qualify for a mortgage if your balance sheet is strong enough. An asset depletion loan lets lenders treat your savings, brokerage accounts, and retirement funds as a stand-in for income, which opens financing to retirees, self-employed investors, and anyone whose wealth lives on a balance sheet rather than a pay stub. It's a non-QM product, which means the rules are set by the lender, not Fannie Mae — so rates run higher than conventional, but the door is open when it otherwise wouldn't be.
At a Glance
- What it is: A mortgage that qualifies you based on liquid assets divided by loan term, not employment income
- Who uses it: Retirees, high-net-worth self-employed borrowers, and investors with strong balance sheets but low reported income
- Formula: Eligible assets ÷ loan term in months = monthly qualifying income
- Asset types that count: Checking, savings, brokerage (100%); retirement accounts at 60–70% after haircut; real estate equity excluded
- Rate premium: Typically 0.50–1.50% above conventional mortgage rates
- Reserve requirement: Most lenders require 6–12 months of PITI remaining after closing
Monthly Qualifying Income = Eligible Assets ÷ Loan Term (months)
How It Works
The depletion formula turns a balance sheet into income. The lender adds up your eligible liquid assets — checking accounts, savings, money market, CDs, taxable brokerage, and retirement accounts with a haircut — then divides that total by the number of months in the loan term. A 30-year loan runs 360 months; a 15-year runs 180. That calculation produces a monthly qualifying income figure used to calculate your debt-to-income ratio alongside any actual income you receive. A borrower with $1,440,000 in eligible assets applying for a 30-year loan gets credited $4,000 per month in qualifying income, which the lender stacks on top of Social Security, rental income, or any other documented sources.
Not all assets count the same way. Liquid accounts — checking, savings, money market, CDs — typically count at 100% of face value. Taxable brokerage accounts generally count at 70–80% to account for capital gains taxes if you were to liquidate. Retirement accounts (IRAs, 401(k)s) are typically counted at 60–70% to reflect both taxes and potential early-withdrawal penalties, even when the borrower is past the penalty age. Business operating accounts are usually excluded on the assumption they are needed to run the business. Real estate equity is almost always excluded because it cannot be "depleted" without selling the property or completing a cash-out refinance. Lenders vary on the exact haircut percentages, so it pays to compare their formulas directly.
Asset depletion loans sit in a different category from bank statement loans. A stated income loan from the pre-2008 era required no documentation at all — asset depletion loans are a documented, post-Dodd-Frank product that requires full asset statements. A bank statement loan calculates income from 12–24 months of deposit history, making it better suited for self-employed borrowers with strong cash flow. Asset depletion is better when the cash flow is low or irregular but the balance sheet is substantial. Because these loans fall outside qualified mortgage guidelines, they are typically held in the lender's portfolio rather than sold to Fannie Mae or Freddie Mac — meaning fewer lenders offer them and rates carry a non-QM premium.
Real-World Example
Marcus retired at 62 after selling his landscaping business. He has $1,850,000 in a brokerage account and $420,000 in a rollover IRA, but his only recurring income is $2,100/month in Social Security. He wants to buy a rental property in Charlotte for $487,000 with 25% down, keeping his mortgage around $365,000.
The lender applies the depletion formula: brokerage at 70% equals $1,295,000; IRA at 65% equals $273,000 — total eligible assets of $1,568,000. Divided by 360 months, that produces $4,356/month in qualifying income. Combined with his Social Security, Marcus shows $6,456/month in total qualifying income. His proposed mortgage payment of $2,389/month produces a debt-to-income ratio of 37%, comfortably under the lender's 45% ceiling. The loan closes at a rate of 7.875%, about 1.25 percentage points above the prevailing conforming rate, and Marcus is required to hold 12 months of PITI — roughly $28,700 — in verified reserves after closing.
Pros & Cons
- Qualifies asset-rich borrowers who would be turned down by conventional underwriting
- No employment verification or W-2s required
- Works alongside Social Security, rental income, pension, or any other documented income
- Avoids forced portfolio liquidation just to manufacture a pay stub
- Available for both purchase and refinance transactions
- Interest rates run 0.50–1.50% higher than conventional loans due to the non-QM premium
- Retirement account haircuts (60–70%) significantly reduce qualifying asset totals
- Fewer lenders offer the product — primarily non-QM specialists and portfolio lenders
- Reserve requirements after closing can be steep (6–12 months of PITI)
- Asset values fluctuate — a market downturn between application and closing can drop a borrower below the qualifying threshold
Watch Out
- Lender formula variation: Every non-QM lender calculates the haircut differently. One lender might count a taxable brokerage at 70%, another at 80%. Get the exact formula in writing before you start the application — a 10-point difference on a $1 million account changes qualifying income by $278/month over 30 years.
- Reserve trap: Most lenders require 6–12 months of PITI in reserves after closing, separate from the assets used to calculate qualifying income. Borrowers who deploy most of their liquidity into a down payment can disqualify themselves at the finish line.
- Retirement account timing: If you are under 59½, lenders may apply a steeper haircut to IRA and 401(k) balances to reflect early-withdrawal penalties — or disqualify those accounts entirely. Confirm the lender's age threshold before counting retirement assets.
- Market risk window: Asset values are verified at application but the loan may not close for 30–60 days. A significant portfolio drop during underwriting can reduce qualifying income and require a larger down payment or additional assets to cure.
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The Takeaway
An asset depletion loan is the right tool when your balance sheet is strong but your income statement isn't. It converts accumulated wealth into mortgage-qualifying power at a price premium, and is most valuable for retirees and self-employed investors whose W-2s don't tell the full financial story. If you hold $1M or more in liquid assets, get quotes from at least two non-QM lenders to see how their formulas translate your portfolio into qualifying income.