How Asset Depletion Creates Qualifying Mortgage Income
Asset depletion converts eligible post-closing assets into monthly qualifying income after the lender discounts certain accounts and removes funds needed for the transaction.
Asset depletion can help a borrower whose liquid assets are stronger than the income shown on paystubs or tax returns. The lender converts a portion of eligible post-closing assets into monthly income and uses that amount in the mortgage DTI calculation.
Which assets enter the calculation
A current asset-depletion program counts checking, savings, and money-market funds at 100% of the verified balance. Publicly traded stocks, bonds, and mutual funds count at 80%, while vested retirement assets count at 70%.
Business assets, crypto, foreign assets, gift funds, borrowed money, restricted stock, 1031 exchange funds, public-sector retirement plans, and 529 plans are excluded under that program.
What gets subtracted before income is calculated
After applying the account percentages, the lender removes the down payment, closing costs, and required reserves. Only the eligible assets expected to remain after closing become the basis for qualifying income.
The remaining amount must also meet the program's minimum-asset threshold. For one current option, a $360,001 to $1.25 million loan requires post-closing eligible assets equal to at least 125% of the loan amount.
Scenario
Assume a borrower is buying a $900,000 primary residence with a $720,000 loan. The borrower has $250,000 in checking, $1.25 million in a brokerage account, and $500,000 in vested retirement assets. The calculation counts $250,000 of checking, $1 million of the brokerage account, and $350,000 of retirement funds, producing $1.6 million in allowable assets.
Subtract the $180,000 down payment, $12,000 of closing costs, and $60,000 of required reserves. The borrower has $1.348 million in eligible post-closing assets, which exceeds the $900,000 minimum required at 125% of the loan amount. Dividing $1.348 million by 84 produces about $16,048 in qualifying monthly income.
At a 50% DTI, total monthly obligations could reach about $8,024. If existing debts total $1,350 per month, about $6,674 remains for principal, interest, property taxes, homeowners insurance, mortgage insurance if applicable, and association dues.
What the lender will document
Four to six months of complete statements for assets used in the calculation, depending on the program.
A current statement near closing to confirm the balance remains available.
Personal ownership of the accounts; business assets are not substituted for personal funds.
The source of any large deposits and evidence that borrowed or gifted funds are not being counted as qualifying assets.
Typical program boundaries
Current asset-depletion options can start around a 680 credit score, allow up to 80% LTV on qualifying loan sizes, and cap DTI at 50% on the example used here. Maximum LTV generally declines as the loan amount rises.
The example program offers loan amounts from $150,000 to $3.5 million for primary-residence purchases and rate-and-term refinances. Exact limits vary by occupancy, loan amount, credit profile, property, and the selected product.
Related lessons
How Asset Utilization Qualifies Without a Traditional DTI
How Lenders Document Variable Income
Related FAQs and articles
FAQ: Which loan program is best?
Article: Buying a Home When You’re Self-Employed
Calculate the post-closing assets first
Bring current account balances, the estimated purchase price, monthly debts, credit range, and the amount available for closing. DRG Mortgage can apply the account discounts and calculate usable monthly income before a full application.