What Is an Asset Depletion Mortgage? A Complete Guide

You have a significant amount of savings, investments, or other assets — maybe enough money to pay off a home loan without breaking a sweat — but a lender still denies you. Without traditional W-2 income streams and tax returns, qualifying for conventional mortgage financing can be tricky, but getting the financing to buy a home isn't impossible. That's where asset depletion mortgages, a type of non-qualifying mortgage (non-QM), come into the picture.

You don't have to be an older retiree with significant assets and a low income to qualify for an asset depletion mortgage. This mortgage option also works well for younger borrowers who might be investors living off of a solid portfolio, entrepreneurs, or self-employed workers with inconsistent income.

The difference with asset depletion loans is that lenders use your liquid assets to calculate a monthly income figure, which they then use to judge your ability to repay the loan. But an asset depletion loan isn't one product. Rather, it's an umbrella term for several programs: Fannie Mae's employment-related assets, Freddie Mac's assets as a basis for repayment, non-QM asset utilization, and non-QM asset qualifier. Bank statement and 1099 loans often come up in the same conversation, but they qualify you on deposits rather than assets.

By the end, you'll know how to calculate assets as income, which type of assets count, and whether the conventional or non-QM route is the better fit for your home purchase.

What is an asset depletion mortgage?

An asset depletion mortgage is a type of home loan where a lender converts a portion of your savings, investments, and other eligible assets into a monthly qualifying income. They then underwrite your loan as if you've earned that figure. But rest assured, this process doesn't do anything to your funds — they aren't withdrawn, frozen, or pledged.

How a lender calculates monthly qualifying income is a key part of asset depletion mortgages. The calculation involves a divisor, or the number of months the lender spreads your assets across, and your net available assets. Some lenders knock off a percentage of volatile assets' market value (known as haircuts), which factor into your net available assets, along with your down payment, closing costs, and required reserves. In some cases, not all of your assets will be eligible.

By considering all these elements, a lender can determine your monthly qualifying income. With that number, they can then assess your ability to repay the loan and accept or reject your application.

But this isn't a one-size-fits-all process. There are two general pathways you can take to use your assets as qualifying income: the agency route through a Fannie Mae or Freddie Mac-backed loan, or the non-QM loan path.

Going the agency route offers the benefit of conventional pricing, but the guidelines allow for narrower eligible assets and a larger divisor number, which lowers your monthly qualifying income figure. The non-QM loan path often features a shorter divisor and broader eligible assets. The trade-offs are haircuts on your assets and higher pricing.

Yet again, your options also split within the non-QM loan world. A lender can either calculate an income figure to run a DTI through asset utilization, or forego the calculation if your assets cover the entire deal through what's called an asset qualifier.

You might hear different names for this type of home loan. Asset depletion, asset dissipation, asset-based, asset utilization, asset qualifier, and employment-related assets as qualifying income are all synonyms lenders can use loosely to refer to this mortgage type.

Why you can be denied even when you could pay cash

It's frustrating to be denied a loan even when you could pay it off with cash. For example, maybe you've retired early and are on a fixed income, but you have a portfolio of assets that could cover the loan nine times over. So why do denials still happen? There's a reasonable explanation.

Legally, lenders offering qualified mortgages must ensure that potential borrowers meet the Ability-to-Repay requirement.[1] 

To do so, the lender must have proof that the borrower has the means to pay back the loan. The proof cannot be your net worth, and that's why a large balance doesn't mean an automatic "pass" during underwriting. It must be documented through eligible, verifiable repayment sources.

"The biggest misconception is for a borrower who has, let's say, $10 million in the bank and wants to get a $1 million loan — [they] may not just automatically qualify," says Travis Erickson, branch manager and licensed mortgage broker at Bonelli Financial Group. "When it comes to Freddie/Fannie, that is especially true due to the Ability to Repay requirement on QM loans."

It all comes down to risk. Equities and residential real estate have delivered similar long-run real returns of about 7% per year, according to research published in the Quarterly Journal of Economics.[2] However, equities are riskier, running about 22% annualized volatility compared to about 10% for residential real estate.

Simply put, a portfolio that could cover a loan today might not do so three years from now. A paycheck is a more stable and reliable repayment measure.

Then there are overlays. These lender-specific requirements, which can vary from Fannie or Freddie baselines, are another reason why asset-depletion borrowers might be denied. For example, Jay Hurst, co-founder and managing partner at Ribbon Home, explains that Fannie rules might allow a particular qualifying criteria (such as credit score) that an investor buying the loan might not. The lender follows the investor's lead, and your loan is denied.

Because of these overlays, the same borrower (or a different borrower with identical assets) might be approved or denied by different lenders. So don't get discouraged and quit if you receive a rejection. Working with a broker who originates asset depletion mortgages can help you find the right lenders to apply with.

There might be other denial reasons that can blindside borrowers, too. One recent Reddit poster expressed frustration with their 1099 income not counting toward an asset depletion mortgage. But when it comes to this mortgage type, 1099 income is not an asset.

"The 1099 income may still matter, but it is not treated as an asset," says Adrian Mathai, president of AMZA Capital. "It has to be analyzed as income under a different set of rules."

How asset depletion qualifying income is calculated

Let's explore how the asset depletion qualifying income calculation works with some examples.

The formula (and the two versions you'll see)

To calculate your monthly qualifying income, lenders will follow this agency formula:

Eligible assets − early-withdrawal penalty (if one would apply today) − funds for down payment, closing costs, and required reserves = net documented assets

Net documented assets ÷ divisor = monthly qualifying income

You might see several numbers used as the divisor and wonder when each is applied. Their usage depends on the agency backing the loan and the loan's term. Fannie uses a divisor representing the loan's term length in months. So that's 360 for a 30-year loan and 300 on a 25-year loan.[3]

No matter the loan term, Freddie divides by 240.[4]

A different divisor makes a big difference in the amount of qualifying income the calculation yields. A shorter divisor, like 240, yields higher qualifying income than a 300 or 360 divisor. That's why you can get vastly different outcomes with the same value in assets. It all depends on who's doing the math.

Maybe you've also seen some confusion around a 70% haircut applied to your net assets before it's divided by 360. This is a misconception. That 70% is not a discount on your assets. Instead, it refers to Fannie's 70% LTV ceiling. While percentage haircuts exist, they're a feature specific to non-QM asset depletion loans — not those underwritten via the agency route.

Fannie vs. Freddie vs. non-QM, side by side

Adrian Mathai, president of AMZA Capital, explains that the same borrower can look very different depending on the program a lender uses. Whether it follows Fannie, Freddie, or other non-QM guidelines, different programs result in different qualifying income even with the same assets.

Sources: Fannie Mae, Freddie Mac[3] [4]

As you can see from the table, when it comes to non-QM loans, a lot varies by lender because there isn't a standard that all non-QM lenders are held to.

"Non-QM lenders rarely use a 360-month timeline," says Erickson. "Instead, they will typically divide by 84 months (7 years) or sometimes even 60 months (5 years). They are also usually way more generous on the haircut — frequently allowing 100% of cash and 60–90% if in stock."

To add to the confusion, non-QM loans further split into two potential pathways for using assets:

• Asset utilization: Process that creates a monthly income figure, which a lender then uses like a salary to determine the DTI ratio
• Asset qualifier: Process that produces no monthly income figure or DTI ratio and instead relies on the borrower having enough assets to cover the loan, closing costs, other accumulated debts, and required reserves while still having a sizeable leftover balance

All these differences are the real reason why so many hopeful borrowers see different, wide-ranging results for the same amount of assets.

Erickson shared an example scenario wherein $1 million in assets minus $100,000 for down payment and closing costs equals $900,000. If you divide that figure by 84 months, you get about $10,714 per month, which supports a $1.2 million to $1.5 million loan.

But note that Erickson's example is an asset-qualifier (no DTI) result. This example would be impossible as asset utilization. A $1.2M loan at a fixed 6.66% rate costs about $9,845 in principal, interest, taxes, and insurance (PITI), which comes out to a 92% DTI — a result that would surely end in loan denial. At 50% DTI, a more reasonable ceiling would be about a $653,000 loan.

As another real-world example (and not an industry standard) LendSure's asset qualifier and depletion programs count 100% of cash, 80% of stocks and bonds, and 70% of retirement funds, with a 60 divisor for asset qualifier and 120 divisor for asset depletion.[5]

The worked example: $1M, 5 different answers

Same $1 million, five different answers

Program and terms	Monthly qualifying income	Supports a loan of about
Fannie, 30-year term (360 divisor)	$2,500	$139,000
Fannie, 25-year term (300 divisor)	$3,000	$167,000
Fannie, after a realistic down payment deduction	$2,665	$148,200
Non-QM, 80% of assets on an 84-month divisor	$9,524	$425,000
Non-QM, 90% of assets on a 60-month divisor	$15,000	$670,000

The details below show how each number is built.

Say a borrower purchasing a primary residence has $1,000,000 in a vested rollover IRA made up of stocks and mutual funds. They're getting a 30-year loan at a fixed 6.66% mortgage rate and have no other monthly debts. Keep in mind that this is a retirement account — that's why the conventional loan path works here.

Calculation:

• $1,000,000 x .10 (estimated down payment and closing costs) = $100,000
• $1,000,000 − $100,000 = $900,000
• $900,000 ÷ 360 = $2,500 per month qualifying income

Note that shortening the loan term, such as to 25 years, raises qualifying income by about $500 per month on the same assets. Plus, if (for example) the borrower is 45 years old, they're subject to a 10% early-withdrawal penalty costing them $278 in monthly income, under the IRS's 59½ rule (not a Fannie rule). But this penalty doesn't automatically disqualify you.

What loan amount does that $1 million income actually support? Let's take a look using these assumptions:

• 45% DTI
• 6.66% fixed interest rate
• 30-year loan (360 divisor)
• 1.6% of annual home purchase price in taxes and insurance
• 80% LTV — available here because our borrower is over 62. Under 62, Fannie caps LTV at 70%, which means a 30% down payment and even less of the account left to generate qualifying income.

With these assumptions, one million dollars in a retirement account supports a conventional loan of only about $139,000. With the agency route, this borrower's $1M doesn't go as far in mortgage financing.

But there's a feedback loop you might not realize exists.

An 80% LTV means the borrower would need to put down 20%, or $34,800 on a house costing $173,800, plus closing costs. If the borrower draws those costs from their retirement fund, then the full $1 million can no longer be used to calculate qualifying income. The lender would need to subtract those costs from the account total and recalculate the income figure.

So in our example, the $100,000 was too aggressive of a deduction to cover the down payment. A younger borrower — say, 45 — would also be subject to a 10% early-withdrawal penalty, costing them $278 in monthly income under the IRS's 59½ rule (not a Fannie rule). But this penalty doesn't automatically disqualify you. So knowing your down payment and closing costs, as opposed to an estimation, can give you a more accurate picture of your qualifying income and max loan amount.

Let's look at this from the non-QM side. A home priced at $783,600 with a loan LTV of 75% means that the borrower would need about $195,915 to close. This amount would decrease the $1 million account to $804,085 and the max loan amount to $587,700. Those numbers assume a lender counting 80% of the account on a 60-month divisor — about $10,721 a month in qualifying income, enough to carry that loan at a 45% DTI. Stretch to the 84-month divisor Erickson mentioned above and the same $804,085 produces roughly $7,658 a month, supporting closer to $425,000. Same borrower, same account, a $160,000 swing in buying power from the divisor alone.

The same asset pool must do two jobs here: generate a qualifying income and pay for the down payment, and paying for the down payment decreases the assets that can be used to generate that qualifying income.

Which assets count (and which get discounted or excluded)

When you're getting an asset depletion mortgage through the agency route, Fannie Mae only allows the use of certain assets.

"Eligible assets will be limited to employment-related assets, such as a vested 401(k), IRA, SEP, or Keogh retirement account, certain severance, or lump-sum retirement distributions," says Erickson. "A regular taxable brokerage account is typically not eligible under this program."

Let's say, for example, you're a 45-year-old early retiree on a fixed income with most of your assets tied up in stocks. What options do you have? Since Fannie only accepts employment-related assets, a taxable brokerage account doesn't qualify — even though the exact same stocks held inside an IRA would. In this case, you'd need to get a non-QM loan, seek a portfolio lender, or pay in cash.

To see the contrast of this example in numbers, let's say this 45-year-old retiree has $1 million in a brokerage account. That same $1 million produces $0 per month in qualifying income under Fannie's program. But with a non-QM loan counting 80% of those assets on an 84-month divisor, the qualifying income would equal about $9,524 per month. Or, this borrower would have about $15,000 per month with 90% counted on a 60-month divisor.

What about age? Where do the ages 59½ and 62 play out in these programs? These ages have two entirely different purposes for asset depletion, and they sometimes can be confused with one another.

Here's the accurate distinction. The age 59½ refers to the IRS early-distribution withdrawal penalty. If you plan to use retirement account funds or IRA funds before reaching age 59½, you'll be subject to a 10% additional tax.[6] There are some exceptions to this rule, such as distributions that aren't taxable and distributions made because of a permanent disability.

Access to the funds is also a determining factor.

"For a borrower under the age of 59½, the main question is whether they have unrestricted access to the retirement funds," says Erickson. "If an early withdrawal penalty would apply, the amount of the penalty must be deducted from the overall balance before dividing."

The age 62 comes from Fannie Mae's LTV threshold.[3] Freddie Mac has its own age-62 rule, and it works differently. When the qualifying assets are non-retirement depository accounts or securities rather than retirement funds, at least one borrower who owns the account must be 62 or older. So the same age matters in both programs — for Fannie it buys you leverage, for Freddie it can be the price of admission.

When the owner of the assets is at least 62 years old, the LTV ceiling rises from 70% to 80%.

To easily visualize the difference in which assets count versus which do not, here's a table comparing the conventional route and the non-QM route. Note that virtual currency (like cryptocurrency) does not count under Fannie's conventional guidelines. Primary home equity, real estate sale proceeds, and inheritance funds also do not count toward an agency-backed loan.

Sources: Fannie Mae B3-3.4-06 for the conventional column.citation]id="fanniemae-b3-3-4-08-interest-dividend-income" sourceName="Fannie Mae" anchorText="B3-3.4-08, Interest and Dividend Income (03/04/2026)" url="https://selling-guide.fanniemae.com/sel/b3-3.4-08/interest-and-dividend-income" updated="Mar 4, 2026" accessed="Aug 19, 2026"[/citation] The non-QM column reflects common program terms described by Travis Erickson and Adrian Mathai and published by LendSure Mortgage Corp.; non-QM has no shared standard, so confirm each asset with your specific lender.

Required reserves is another area that might confuse asset-rich borrowers. The key point to remember here is that the same asset pool must generate the qualifying income and remain there afterward to count as sufficient reserves.

If, for example, the PITI on a Freddie-backed loan is about $1,763 per month, then a required six months worth of reserves is $10,600. If 12 months of reserves were required, that'd be $21,200, and 24 months of reserves comes to $42,300. Required reserves will likely vary by lender, as there is no set rule on a required amount. Your best bet is to ask lenders when shopping around.

If the loan still doesn't meet these parameters, the same assets may still work as interest and dividend income or annuity, pension, or retirement income.[7] Just because you've been denied under one method doesn't mean you'll get a denial under all of them.

Asset depletion mortgage rates

Will your rate be worse on an asset depletion mortgage? It depends on whether you choose an agency or non-QM loan.

The average 30-year fixed rate for a conventional loan was 6.67% as of August 13, 2026, according to Freddie Mac. The 15-year rate averaged 5.96%.[8]

If you go the agency route and get approved, you'll get conventional loan pricing because it is still a conventional loan. If you need to go the non-QM loan route to get approved, you'll need to pay a premium, which will be reflected in the rate.

Because the rate you'll get depends on the program you qualify under, the best path forward is to request a Loan Estimate from lenders to get the mortgage rate in writing. You can use those Loan Estimates to compare lender offers and find the one with the best rate and terms.

Rates climbed from about 6.43% in early July to a recent high of 6.69% in early August before easing back to 6.67%. So you might be wondering if you should wait for rates to drop before making any mortgage moves. Realistically, rates have held in the high-6.6% range for weeks — close to where they sat a year ago (6.58%) and well below the level from several years ago, when they peaked at almost 8.00%.[8]

Waiting for rates to drop back to the 6.40% range isn't likely to make much difference to your payment. On the $587,700 non-QM loan from our example, the gap between 6.43% and 6.67% is about $93 a month, or roughly $1,115 a year. Real money — but nowhere near the number that decides whether asset depletion works for you. The divisor your lender uses moves your buying power by hundreds of thousands of dollars. The quarter point you're waiting on moves it by a rounding error.

To compare, the difference between a 6.67% and a 7.79% rate (the peak 30-year fixed rate in October 2023, as per Freddie Mac) is about $304 per month or about $3,643 per year — a much larger chunk of change.[8]

So if now is the right time for you to buy a home, don't let the current rate environment stop you. Knowing your budget, run the numbers to visualize monthly payments at different rates to decide whether it's truly worth waiting or getting a mortgage now.

Asset depletion vs. the alternatives: Which door is right for you?

One of the most important things you can do is ask the lender whether they're using Fannie or Freddie asset depletion, a portfolio loan, or a non-QM loan. Lenders may not volunteer this information unless the borrower straight out asks, explains Nancy Chu, realtor and team lead at Keller Williams.

There are several products that allow you to use your assets as a means of qualifying for a mortgage. But which one is right for you? The table below classifies each products' strengths and weaknesses based on a borrower's situation, and it can point you in the right direction.

One recent Redditor offered a helpful framework that might make the right pathway more clear. If you have strong credit, income, and assets, an agency product might be best. If you're only strong in two of those areas, a non-QM loan could be your path, whereas strength in just one area might point you toward a hard money loan. Note that this is reader-sourced — not professional — advice.

Source: Chase[9]

If you're an investor purchasing a rental property, DSCR loans (debt service coverage ratio loans) are made specifically for that purpose, so you can skip asset depletion and benefit from DSCR's lower prices, explains Erickson. All you need to qualify is proof of the property cash flows.

As a concrete example for asset qualifier, let's say you buy a $1.5 million property at 75% LTV. With $375,000 down upfront, plus about $30,000 in closing costs and assets covering the $1.125 million loan, you'd need about $1.53 million in verified assets at 100% coverage. Some readers have reported required coverage going as high as 125% or 160%, which would total $1.81 million and $2.21 million in verified assets, respectively. Note that these percentage multiples are not industry rules but based on individual experiences.

And while SBLOC/margin loans can be a real option offering flexible use of funds, be wary of this route before proceeding.[10] [11] You might see some borrowers out there who used this option and who are touting margin loans for 1-2% rates. But there's a huge caveat: These lines are adjustable, which means that the rates will change, sometimes nightly, as one reader notes. Plus, a margin call can force liquidation when you're not expecting it.

Knowing the loan officer's process for assessing borrowers can help you understand what documentation to bring and how to get approved.

"So I usually look at the borrower's full picture first: liquid assets, retirement funds, rental income, business deposits, reserves, and the property type," says Mathai.

Should you buy before you leave your job?

If possible, it's a smart idea to buy a property before you leave your job and still have W-2 income. Conventional loans beat asset depletion on interest rates, the loan size, and hassle. For example, a documented $107,000 salary supports about a $500,000 loan, while $1 million sitting in an IRA supports about $139,000 — under the same rate, DTI, and LTV assumptions we used above.

But maybe you need to see the numbers for both scenarios first to decide. In that case, ask a lender for two quotes, one as a W-2 borrower and another as an asset-depletion borrower. Compare the quotes side by side for rates, required reserves, cash to close, and monthly payments.

However you choose to handle this situation, avoid quitting your job after you've submitted a mortgage loan application but before you close on the house. Misrepresenting your employment status on a mortgage application is considered mortgage fraud.

If you anticipate an employment change in the near future, be honest about it. The lender reverifies your employment status shortly before closing, so it's best not to attempt hiding anything; doing so creates real legal problems. Telling your loan officer about your plans early gives them time to work around the changes before closing. Once you get to closing day, it's too late to fix a discovered change.

Bottom line: You can get a mortgage while still employed, or you can get one while planning to leave and change careers. You just can't misrepresent a change you already know about.

And don't buy with the assumption that refinancing the mortgage later without W-2 will automatically be easier. You'll still face the same asset eligibility limits and LTV ceilings. Plus, Fannie's method doesn't allow for a true cash-out refinance.[3]

How to get approved: Step by step

Once you're ready to buy a home, follow these steps to get approved for an asset depletion mortgage:

Inventory your assets by category, not by total

Remember that your net worth is different from your qualifying assets. Get yourself organized before approaching lenders by separating your retirement accounts from taxable accounts, vested funds from unvested, and liquid assets from illiquid.

With this work done early, you'll be able to identify which products could be an option for you.

Find a lender or broker who actually originates these loans

Generalist lenders or brokers may provide you with a good quote but then fail to deliver. It's best to shop around for and apply with lenders who have experience in asset depletion.

"A great rate means nothing if the lender can't close the deal," says Mark Cohen, founder, CEO, and loan officer of Cohen Financial Group in Beverly Hills, California.

Ask which product you're being underwritten under

If you don't ask, loan officers might not disclose whether they underwrite asset depletion mortgages as agency, non-QM, or portfolio loans. Ask this question upfront so you know what to expect moving forward and whether you'd rather continue shopping around for a lender who underwrites under a different product.

Get four numbers in writing on a Loan Estimate

These four numbers include the monthly payment, cash to close, required reserves after closing, and the rate. Remember, your required reserves need to come from the same pool that generates your qualifying income.

Shop at least three lenders

"A rejection from one lender is not a rejection from all… obtain at least three quotes," says Hurst. Even if brokers access the same wholesalers, they can still come back with different pricing, so it's worth shopping around.

Run both scenarios

Ask each lender for two written quotes — one qualifying you on W-2 income, one on assets — and line up four numbers side by side: the rate, the monthly payment, the cash needed to close, and the reserves you have to leave untouched afterward. Then check the trap: if the reserves requirement eats into the pool generating your qualifying income, your loan amount shrinks. Make the lender show you the recalculated figure, not the first one they quoted.

FAQ