Reviewed by Tammy Saul, JD, MBA, CEO & Co-Founder.
What is an asset depletion loan? An asset depletion loan is a mortgage qualification method that converts eligible savings, investments, or retirement assets into calculated monthly income. Lenders divide countable assets by a set number of months to arrive at a qualifying income figure, instead of relying only on W-2 pay stubs or tax returns. The exact math varies by program.
Key takeaway
- Asset depletion is a qualification method, not a separate loan product like FHA or VA.
- Eligible assets are reduced by any required percentage, then divided by a program-specific number of months to produce monthly qualifying income.
- The percentage applied to each asset type and the divisor used both vary by lender. There is no single industry-wide formula.
If you have a strong balance sheet but your tax returns or pay stubs do not show enough traditional income, you may have come across the terms asset depletion loan, asset depletion mortgage, or even mortgage with no income but assets. These all point to the same basic idea: using what you have saved and invested to support a mortgage application, in a way that traditional income-based underwriting cannot capture.
What Is an Asset Depletion Loan?
An asset depletion loan is not a distinct product with its own set of rates and terms, the way an FHA loan or a VA loan is. It is a qualification method. Underwriters look at eligible assets such as bank accounts, brokerage accounts, and retirement funds, apply program-specific rules to determine what counts, and convert a portion of those assets into a monthly income figure.
This differs from simply using assets for a down payment. In an asset depletion loan, the assets generally remain in your accounts. They are not spent or liquidated to close the loan. Instead, the lender uses the value of those assets to demonstrate that you have the financial capacity to make mortgage payments over time, even if your documented income does not support the loan amount on its own.
This approach exists in part because federal rules require lenders to reasonably determine that a borrower can repay a mortgage. Under the Consumer Financial Protection Bureau’s Ability-to-Repay requirements (Regulation Z, 12 CFR 1026.43), a lender must verify a borrower’s ability to repay using reliable evidence, but that evidence is not limited to employment income. Assets are one of the factors a lender may consider when documenting repayment ability, alongside income, credit history, and other obligations.
For borrowers whose net worth is stronger than their pay stubs suggest, such as a retiree living on savings or a business owner who reinvests most of their earnings, asset depletion can help bridge the gap between what they own and what a traditional income calculation would show.
Asset Depletion, Asset Utilization, and Asset Dissipation: What the Names Mean
You may see this qualification method described with different names, including asset depletion, asset utilization loan, and asset dissipation loan. In most cases, these terms describe the same general idea: taking eligible assets and converting them into a monthly income figure for qualification purposes. You may also see the broader phrase asset based mortgage used, though that term is also used in business lending contexts that have nothing to do with home loans.
Lenders are not consistent about which term they use, and some use these words to describe slightly different calculations. One program’s “asset depletion” formula and another lender’s “asset utilization” formula may treat the same account very differently. Before assuming a term describes a specific set of rules, ask the lender how their calculation works.
This is also different from an asset qualifier mortgage, which is a separate qualification method covered later in this article.
Who Are Asset Depletion Loans Designed For?
Asset depletion loans tend to fit borrowers whose documented income does not reflect their full financial picture, including:
- Retirees and early retirees who live on savings, investment accounts, or retirement funds rather than a paycheck.
- High-net-worth households with significant assets but modest reported income.
- Self-employed borrowers and business owners whose tax returns show reduced income after deductions, even though their assets are substantial.
- Borrowers who recently sold a business and are holding the proceeds in savings or investment accounts before reinvesting them.
- Portfolio-heavy borrowers, such as those with large brokerage or investment holdings but limited earned income.
- Borrowers between careers, including those who left traditional employment and have not yet started a new income stream.
Getting a mortgage in retirement is one of the most common reasons people search for this qualification method. Many retirees have paid off other debts and built substantial savings, but Social Security and pension income alone may not support the loan amount they want. Asset depletion is one way, though not the only way, that retirement savings and investment accounts may be used to help support a mortgage application.
Having assets does not automatically mean you will qualify. Lenders still review credit, the property, reserves, and other program requirements, which are covered later in this article.
How Asset Depletion Income Is Calculated
While the details vary by program, most asset depletion calculations follow the same general structure:
- Start with eligible assets in qualifying accounts.
- Apply any required percentage, sometimes called a haircut, to certain asset types.
- Subtract funds needed for the down payment, closing costs, and any required reserves.
- Divide the remaining eligible assets by the program’s depletion period, expressed in months.
- The result may be treated as monthly qualifying income.
The percentage applied to each asset type and the divisor used in step four are both set by the individual program. This is the single most important thing to understand about asset depletion: the divisor is program-specific, and it has a major effect on how much qualifying income your assets produce.
A Worked Example (Illustrative Only)
Illustrative example based on one current non-QM program. Other programs use different calculations.
| Asset type | Balance | Eligible percentage | Countable amount |
|---|---|---|---|
| Checking and savings | $200,000 | 100% | $200,000 |
| Publicly traded stocks, bonds, and mutual funds | $700,000 | 80% | $560,000 |
| Retirement accounts (borrower is 59½ or older in this example) | $300,000 | 70% | $210,000 |
| Total countable assets | $970,000 |
The program in this example then subtracts funds needed for the down payment, closing costs, and required reserves, estimated here at $120,000.
$970,000 minus $120,000 leaves $850,000 in remaining eligible assets.
This program divides remaining eligible assets by 84 months.
$850,000 divided by 84 equals approximately $10,119 in calculated monthly qualifying income.
This example illustrates the mechanics of one current non-QM approach. It is not a universal formula, and the percentages, deductions, and divisor shown here will not match every lender.
Why the Divisor Matters
The number of months a program uses to divide remaining assets has a significant effect on the resulting qualifying income. Using the same $850,000 in remaining eligible assets from the example above:
| Divisor used | Calculated monthly qualifying income |
|---|---|
| 60 months | $14,167 |
| 84 months | $10,119 |
| 180 months | $4,722 |
| 240 months | $3,542 |
| 360 months | $2,361 |
A shorter divisor produces higher calculated income from the same asset balance, while a longer divisor produces lower calculated income. The divisor is not the only difference between programs. Eligible asset types, percentage deductions, required reserves, occupancy rules, and maximum loan-to-value ratios also vary and affect the outcome.
Which Assets Can Be Used?
Programs commonly consider some combination of the following asset types:
- Checking and savings accounts
- Money market accounts
- Certificates of deposit
- Publicly traded stocks, bonds, and mutual funds
- Retirement accounts, such as 401(k), IRA, and similar plans
Treatment of each asset type varies by program. A lender may:
- Count only a percentage of certain investment or retirement accounts rather than the full balance.
- Apply different rules to retirement assets depending on the account type and the borrower’s age.
- Require deductions for funds needed at closing and for ongoing reserves.
- Exclude certain categories entirely, such as business assets, unvested equity, or non-liquid holdings.
Because these rules differ so much by program, the only reliable way to know what counts for your situation is to review your specific asset statements with a loan officer familiar with the program’s guidelines.
Assets That May Not Count
A high net worth does not automatically translate into a high amount of eligible assets for qualification purposes. Assets that are illiquid, restricted, borrowed, or otherwise not readily accessible are commonly treated differently, and some may not count at all. This can include:
- Business assets that are not held personally
- Assets pledged as collateral for another loan
- Funds borrowed shortly before the loan application
- Gifted funds, depending on the program
- Annuities, depending on payout structure and accessibility
- Non-liquid assets such as real estate held for investment, collectibles, or business equity
- Funds tied to the transaction itself, such as cash-out proceeds from the loan being originated, which are commonly excluded from the qualifying calculation since they do not exist until after closing
If a significant share of your net worth sits in one of these categories, asset depletion may produce a lower qualifying income figure than you expect. This is one reason to review your full asset picture with a loan officer before assuming a specific dollar amount will qualify.
Asset Depletion vs. Asset Qualifier vs. Bank Statement vs. DSCR Loans
Asset depletion is one of several methods lenders use to look beyond a traditional pay stub and tax return package. These methods are not interchangeable, and questions like asset depletion vs bank statement loan are some of the most common points of confusion for borrowers researching asset-based mortgages.
| Asset Depletion | Asset Qualifier Mortgage | Bank Statement Loan | DSCR Loan | |
|---|---|---|---|---|
| What is evaluated | Eligible assets converted into calculated monthly income | Verified assets on hand, generally without converting them into a monthly income figure | Documented bank deposits over a set period | Rental income compared to the property's debt obligations |
| How qualification works | Assets are divided by a program-specific number of months to produce qualifying income | Sufficient verified assets, combined with credit, reserves, and property eligibility | Average monthly deposits establish a cash flow figure used as income | The property's cash flow is compared to the proposed mortgage payment |
| Typical borrower | Retirees, high-net-worth households, portfolio-heavy borrowers | Borrowers with strong verified assets who do not need a monthly income conversion | Self-employed borrowers with strong deposit history | Real estate investors |
| Typical occupancy | Primary residence, second home, and in some programs investment property, depending on guidelines | Primary residence and, on some programs, second homes, depending on guidelines | Primary residence, second home, or investment property, depending on the lender | Investment property |
| Key documentation | Asset statements plus a depletion calculation | Asset statements without a depletion calculation | Personal or business bank statements | Lease agreements or a rent schedule, appraisal with rent comparison |
Asset Qualifier Mortgage
An asset qualifier mortgage is a different method from asset depletion. Rather than converting assets into a calculated monthly income figure, it focuses on whether a borrower holds enough verified assets, alongside credit, reserves, and property eligibility, to support the loan. Federal Hill Mortgage offers a separate program built around this approach. Read more about Federal Hill Mortgage’s Qualified Asset Mortgage to see how it differs from the asset depletion method described in this article.
Bank Statement Loan
A bank statement loan generally derives qualifying income from documented deposits and cash flow rather than from accumulated assets. This method is common among self-employed borrowers whose tax returns understate their actual cash flow after deductions. If you are self-employed and want to see how documentation requirements compare, see our guide on CPA letters for self-employed borrowers.
DSCR Loan
A DSCR loan, short for debt service coverage ratio loan, is built for investment properties. Qualification focuses primarily on whether the property’s rental income covers its own debt obligations, rather than on the borrower’s personal income or assets. Learn more in our guide to how a DSCR loan works and how to calculate it. If you are exploring financing for a rental property in general, see our investment property loan options.
Can You Use Assets as Income on a Conventional Loan?
Asset depletion, as described in this article, is most commonly associated with non-QM (non-qualified mortgage) programs. Conventional loans backed by Fannie Mae and Freddie Mac have their own, separate rules for using assets as a basis for qualifying income. It is not accurate to say that Fannie Mae or Freddie Mac “offer asset depletion loans.” Instead, each has published guidance on how certain assets may be used to help establish qualifying income under conventional underwriting.
Fannie Mae
Fannie Mae addresses this under Selling Guide Section B3-3.4-06, Employment Related Assets as Qualifying Income. This rule is narrower than many non-QM programs. Only employment-related assets are eligible, meaning a severance package or lump-sum retirement distribution documented with a 1099-R, or funds in a 401(k), IRA, SEP, or Keogh account the borrower can access without restriction. Ordinary checking and savings balances generally do not qualify unless the balance can be traced back to one of those eligible sources, and assets such as stock options, unvested restricted stock, lawsuit proceeds, lottery winnings, real estate sale proceeds, inheritance, divorce proceeds, and virtual currency are not eligible.
Fannie Mae calculates “Net Documented Assets” by subtracting any early-withdrawal penalty and the funds needed for the down payment, closing costs, and reserves from the eligible balance, then divides the result by the loan’s amortization term in months. In Fannie Mae’s own published example, a $500,000 IRA becomes $450,000 after a 10 percent early-withdrawal penalty, then $350,000 after subtracting $100,000 needed for closing, and $350,000 divided by a 360-month term produces about $972 in monthly qualifying income. This qualification path also carries a maximum loan-to-value ratio of 70 percent, or 80 percent if the asset owner is at least 62 years old at closing, and is limited to purchase and limited cash-out refinance transactions on a principal residence or second home. If you search for Fannie Mae asset depletion guidelines, this is the rule you will find, not a program actually called “asset depletion.”
Freddie Mac
Freddie Mac addresses this under Guide Section 5307.1, Assets as a Basis for Repayment of Obligations, and recently updated it. Freddie Mac Bulletin 2026-10, issued August 5, 2026, reduces the divisor used to convert eligible assets into qualifying income from 240 months to 180 months, removes the age-62 requirement that previously applied to depository and securities accounts, replaces the special 80 percent loan-to-value ceiling with the mortgage’s standard LTV, TLTV, and HTLTV limits, and expands eligible occupancy to include investment properties alongside primary residences and second homes. The update also adds documentation requirements, including account seasoning and a minimum net eligible asset amount. These changes are mandatory for mortgages with settlement dates on or after February 3, 2027, though Freddie Mac permits lenders to adopt them sooner. If you search for Freddie Mac asset depletion guidelines right now, the rising interest is tied to this update. Because it is recent, confirm with your loan officer which version of the rule your lender is currently using.
The Difference Between Agency and Non-QM Approaches
Conventional (agency) asset-based income rules and non-QM asset depletion programs can differ substantially in eligible asset types, required percentages, the calculation itself, occupancy requirements, maximum loan-to-value ratios, and documentation. A calculation that works under one framework will not necessarily produce the same result, or even be allowed, under the other. The two agencies do not even agree with each other: Fannie Mae’s rule reaches only employment-related assets such as a severance package or an accessible retirement account, while Freddie Mac’s updated rule reaches a broader set of accumulated assets, including ordinary depository and securities accounts. The same $500,000 balance would not necessarily be treated the same way by both agencies, let alone by a non-QM program. This is another reason to work with a loan officer who can tell you which framework applies to your scenario, rather than assuming a formula found online applies universally.
What Lenders Still Review
Asset depletion changes how qualifying income may be established. It does not eliminate underwriting. Even when traditional employment income is not the basis for qualification, lenders still typically review:
- The eligible assets themselves and their documentation
- Credit history and credit score
- Down payment and equity in the property
- Required reserves after closing
- Other debts and liabilities, factored into a debt-to-income or similar repayment calculation
- Occupancy and property eligibility
- The appraisal
- The requested loan amount
- Any prior credit events
- Other program-specific requirements
This is why asset depletion loans should not be described as no-doc loans. The documentation requirement shifts, from primarily income documents to primarily asset documents, but it does not disappear.
Documents You May Need
Because requirements vary by program, treat this as a general starting point rather than a complete list. Borrowers commonly need to provide:
- Several months of statements for each asset account being used
- Documentation showing ownership of and access to the assets
- Explanations or documentation for large deposits or transfers, where required
- Credit authorization
- Identification
- Purchase contract or refinance transaction documentation
- Documentation confirming the source of closing funds and reserves
Your loan officer can tell you exactly which documents apply to your specific program and scenario.
Is an Asset Depletion Loan Right for You?
You may be a good fit if:
- You hold substantial eligible liquid, investment, or retirement assets.
- Your traditional documented income understates your actual financial strength.
- Enough eligible assets remain after accounting for closing costs and required reserves.
- You can meet the program’s other credit, property, and documentation requirements.
This may not be the best fit if:
- Most of your net worth is tied up in illiquid or restricted assets.
- Your assets are not currently accessible or are pledged elsewhere.
- A bank statement loan would produce stronger qualification based on your deposit history.
- You are purchasing an investment property, where a DSCR loan may fit better.
- Traditional income-based financing already works for your situation.
This is general guidance, not an approval determination. The only way to know which qualification method fits your scenario is to review your full financial picture with a loan officer.
Frequently Asked Questions
-
What is an asset depletion loan?
An asset depletion loan is a mortgage qualification method that converts eligible assets, such as savings, investments, or retirement accounts, into a calculated monthly income figure, instead of relying only on traditional employment income.
-
How does asset depletion work for a mortgage?
A lender identifies eligible assets, applies any required percentage to certain asset types, subtracts funds needed for the transaction and reserves, and divides the remainder by a program-specific number of months to produce monthly qualifying income.
-
How much money do I need for an asset depletion loan?
There is no single required amount, since minimums vary by program and by the size of the loan being requested. Your loan officer can review your specific assets against the requirements of available programs.
-
What assets can be used?
Commonly considered assets include checking and savings accounts, money market accounts, certificates of deposit, publicly traded stocks, bonds, mutual funds, and retirement accounts. Which assets count, and at what percentage, depends on the program.
-
Can retirement accounts be used?
Many programs allow retirement accounts to be used, but often at a reduced percentage and with rules tied to your age or ability to access the funds without penalty. Confirm the specific treatment with your loan officer.
-
Does age affect how retirement assets count?
On many programs, yes. Some programs apply different rules depending on whether you have reached the age where retirement funds can typically be accessed without an early withdrawal penalty.
-
Do I have to sell my investments?
No. In an asset depletion loan, the assets generally remain in your accounts. The lender uses their value to calculate qualifying income, rather than requiring you to liquidate them.
-
Can I combine asset-derived income with Social Security, pension, or other qualifying income?
Many programs allow asset-derived income to be combined with other qualifying income sources, such as Social Security or pension payments, but this depends on the specific program’s guidelines.
-
Can an asset depletion loan be used for a primary residence, second home, or investment property?
This depends on the program. Some allow primary residences and second homes, and some extend to investment properties, subject to their own eligibility and reserve requirements.
-
What is the difference between an asset depletion loan and an asset qualifier mortgage?
Asset depletion converts eligible assets into a calculated monthly income figure. An asset qualifier mortgage instead focuses on whether a borrower holds sufficient verified assets, without necessarily converting them into monthly income through a depletion formula. See Federal Hill Mortgage’s Qualified Asset Mortgage for more detail.
-
What is the difference between asset depletion and a bank statement loan?
Asset depletion is based on accumulated assets. A bank statement loan is based on documented deposits and cash flow over a period of months. Borrowers with strong assets but inconsistent deposit history may fit asset depletion better, while borrowers with strong, consistent deposits may fit a bank statement loan better.
-
Is an asset depletion mortgage a no-doc loan?
No. Lenders still review asset documentation, credit, reserves, the property, and other underwriting factors. The type of documentation shifts from income documents toward asset documents, but documentation is still required.
-
Does Fannie Mae or Freddie Mac allow assets to be used as qualifying income?
Yes, but under different rules. Fannie Mae’s guidance covers employment-related assets only, such as a severance package or an accessible retirement account. Freddie Mac’s guidance, updated by Bulletin 2026-10, covers a broader set of accumulated assets and becomes mandatory for settlements on or after February 3, 2027, with earlier lender adoption allowed. Neither is the same as a non-QM asset depletion program, so confirm the current requirements with your loan officer.
-
Is there an asset depletion mortgage calculator?
Because the percentage applied to each asset type and the divisor used both vary by program, a single calculator cannot accurately estimate every scenario. A loan officer can run the calculation using the specific program guidelines that apply to your assets.
Get a Scenario Review
Having substantial assets but income that does not fit traditional mortgage guidelines is a common situation, not an unusual one. Federal Hill Mortgage works with borrowers whose financial strength shows up on a balance sheet more than it does on a pay stub. Depending on your assets, income, credit, property, and occupancy, different qualification methods, including asset depletion, an asset qualifier mortgage, a bank statement loan, or a DSCR loan, may be available.
Have substantial assets but income that doesn’t fit traditional mortgage guidelines? Send us your scenario. We’ll review the current mortgage options and help determine which qualification method may fit.
Ready to move forward? You can also start an application once you know which path fits your situation.
