Asset Depletion Mortgages: How Assets Become Income

An asset depletion mortgage lets you qualify for a home loan by converting your savings, investments, or retirement accounts into a monthly “income” figure, rather than relying on pay stubs or tax returns. Lenders call this asset dissipation underwriting, and it works by dividing your eligible assets, after subtracting penalties, reserves, and your down payment, by a set number of months.

This approach tends to fit retirees living off portfolio withdrawals, entrepreneurs who recently sold a business, and investors sitting on large brokerage or retirement balances with little W-2 income to show. The Office of the Comptroller of the Currency has issued guidance treating this method as a notional annuity, meaning banks are expected to apply the same prudent risk management they use for any other mortgage underwriting decision.

• You do not need to liquidate your assets. The lender models what they could produce as income.
• Agencies like Fannie Mae and Freddie Mac allow it, but with stricter divisors than many non-QM lenders.
• David Mordue of Forward Financial Group runs these calculations across multiple lender programs to find which divisor produces the strongest qualifying number for your file.

Quick fact: Freddie Mac uses a 240-month divisor for its version of asset depletion, which produces meaningfully higher monthly qualifying income than the 360-month divisor Fannie Mae applies under its standard formula.

Key Takeaways

Qualifying income from an asset depletion mortgage depends far more on the lender’s chosen depletion period than on your total account balance.

This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.

Table of Contents

• How Asset Depletion Underwriting Calculates Your Qualifying Income
• Which Assets Count, and How Much of Their Value Lenders Credit
• Eligibility Thresholds and How Agency Loans Differ From Non-QM Programs
• Two Worked Examples: How the Divisor Changes Your Loan Size
• Weighing the Costs Against the Benefit of Qualifying
• Preparing Your Documents and the Right Questions to Ask a Lender
• Why the Divisor Deserves More Attention Than It Gets
• How David Mordue - Forward Financial Group Runs Your Numbers
• Sources

How Asset Depletion Underwriting Calculates Your Qualifying Income

The math behind an asset depletion mortgage follows a consistent sequence, even though the final number varies wildly by lender. The standard calculation works like this:

1. Total your eligible assets — cash, brokerage accounts, retirement funds, and other liquid holdings the lender allows.
2. Subtract closing costs, your down payment, and required post-closing reserves.
3. Deduct early-withdrawal penalties on retirement accounts, if applicable.
4. Divide the remaining balance by the depletion period (measured in months) to get your monthly qualifying income.

That fourth step is where lenders diverge the most. Fannie Mae typically ties the divisor to your remaining loan term in months, often 360 for a 30-year loan. Freddie Mac fixes its divisor at 240 months regardless of loan term. Non-QM lenders set their own rules entirely, and many use 60 to 120 months, a range that can multiply your qualifying income several times over compared to an agency loan.

None of this requires selling a single share or closing an IRA. The lender simply models the account as if it were generating a steady payout, the same logic behind an annuity. That single input, the depletion period, does more to determine how much house you can afford than almost any other variable in the file.

Which Assets Count, and How Much of Their Value Lenders Credit

Not every dollar in your accounts counts the same way. Lenders apply “haircuts” that reduce the usable value of certain asset types before running the depletion formula.

• Checking and savings accounts: Typically credited at 100% of value.
• Brokerage and investment accounts: Usually counted at 70% to 80%, reflecting market volatility.
• Retirement accounts (401(k), IRA): Often credited at 70% to 80%, with the discount steeper if you are under 59½ and would face early-withdrawal penalties.
• Vested stock options or employer stock: Sometimes eligible, but subject to seasoning and documentation requirements.

Assets that usually don’t count include restricted stock that hasn’t vested, funds transferred into an account without a seasoning history, cryptocurrency holdings, and lawsuit or settlement proceeds that haven’t sat in your account long enough to establish a clear paper trail. Fannie Mae’s selling guide draws a firm line between employment-related assets and other asset categories, and each comes with its own documentation rules.

Pro Tip: Move any recent windfall, an inheritance, a bonus, or sale proceeds, into your primary account well before you apply. Most programs want at least 60 days of seasoning before they’ll count the funds toward your depletion calculation.

Eligibility Thresholds and How Agency Loans Differ From Non-QM Programs

Every lender sets its own bar, but a few benchmarks show up again and again in asset depletion underwriting.

• Credit score: Most programs want a FICO score of 660 or higher, though some non-QM lenders will go lower with compensating factors.
• Reserves: Expect a requirement of six to twelve months of PITIA (principal, interest, taxes, insurance, and association dues) held back after closing. Some bank programs, including asset qualifier products from lenders such as Farm Bureau Bank, require reserves well into six figures depending on loan size.
• Down payment and LTV: Agency programs generally cap loan-to-value around 70%, though Fannie Mae raises that ceiling toward 80% once the borrower turns 62, recognizing that older borrowers have shorter time horizons to deplete assets.
• Documentation: Two to three months of account statements, proof of ownership, trust documents if the assets sit in a trust, and any statements showing early-withdrawal penalties.

Agency loans keep divisors longer and asset categories narrower, which usually means lower rates but a smaller qualifying income number. Non-QM lenders flex on both fronts. Shorter divisors, broader asset acceptance, but you’ll pay a rate premium for that flexibility.

Two Worked Examples: How the Divisor Changes Your Loan Size

Numbers make this concrete faster than any explanation. Consider a borrower with $500,000 in a traditional IRA, no other significant income, and a target purchase requiring $600,000 in financing.

1. Subtract the basics. After a 10% early-withdrawal penalty consideration ($50,000) and six months of reserves ($30,000), roughly $420,000 remains eligible for the depletion formula.
2. Apply the agency divisor. Divided by 360 months (Fannie Mae’s typical approach), that produces about $1,167 in monthly qualifying income.
3. Apply a non-QM divisor. The same $420,000 divided by 60 months produces $7,000 in monthly qualifying income, more than six times higher.

These figures assume no other income and don’t account for taxes, insurance, or specific lender overlays, so treat them as illustrations rather than a preapproval. Running your own numbers through a refinance calculator or talking through the scenario with a broker gives you a far more accurate picture than a generic example ever could.

Weighing the Costs Against the Benefit of Qualifying

Non-QM asset depletion loans typically carry a modest rate premium over conventional financing, though the exact spread depends on your credit profile, reserves, and the specific lender’s risk appetite.

That premium buys you something real: the ability to qualify at all when your tax returns show modest income despite a strong net worth. The trade-off works in your favor if the alternative is renting indefinitely or missing out on a purchase you can clearly afford. It works against you if depleting retirement assets on paper today creates a real shortfall in your actual retirement plan years from now.

Watch for a few red flags. A lender who can’t clearly explain their divisor, one who quotes reserve requirements that leave you with almost nothing post-closing, or one whose divisor is so long it barely moves your qualifying income, all deserve a second look.

Pro Tip: Ask any lender to show you the math in writing before you commit to an application. If they can’t produce a clear worksheet, that is a signal to keep shopping.

Preparing Your Documents and the Right Questions to Ask a Lender

Before you contact anyone, gather two to three months of statements for every account you want counted, proof of ownership on brokerage and retirement accounts, trust documents if applicable, and any paperwork showing withdrawal penalties or restrictions.

Then bring these eight questions to every lender or broker conversation:

1. What depletion period (divisor) do you use, and is it fixed or negotiable?
2. How many months of reserves do you require after closing?
3. What’s your maximum LTV for asset depletion borrowers?
4. How do you treat retirement accounts differently from brokerage accounts?
5. What rate premium applies compared to a standard income-qualified loan?
6. How long does underwriting typically take for this loan type?
7. Do you require seasoning on recently deposited funds, and for how long?
8. Do you sell this loan to Fannie Mae or Freddie Mac, or hold it in portfolio?

That last question matters more than it sounds. Portfolio lenders and non-QM shops set their own rules, while agency-bound loans must follow Fannie and Freddie’s published guidelines exactly. A broker who works across both worlds can shop your file against several divisors at once rather than betting everything on one lender’s formula.

Why the Divisor Deserves More Attention Than It Gets

Most articles on asset depletion mortgages spend their energy explaining what qualifies as an asset. That’s useful, but it misses the bigger lever. The depletion period itself, whether a lender uses 360 months, 240 months, or something closer to 60, does more to determine your buying power than your account balance ever will. A borrower with $500,000 in an IRA can qualify for a modest condo under one lender’s math and a genuinely larger home under another’s, without a single dollar changing hands.

Conventional wisdom treats asset depletion like a fixed formula you either qualify for or don’t. It isn’t. It’s a negotiation between your asset mix, your timeline, and which lender’s risk appetite matches your file. The borrowers who do best here aren’t the ones with the biggest portfolios. They’re the ones who understood the divisor was negotiable and shopped accordingly, rather than accepting the first number a single loan officer handed them.

If you take one thing from this guide, prioritize understanding your divisor options before you fall in love with a specific house. The math should shape your search, not the other way around.

— David Mordue

How David Mordue - Forward Financial Group Runs Your Numbers

David Mordue built Forward Financial Group around a simple frustration: too many asset-rich borrowers get turned away by lenders who only know one divisor. As a mortgage broker rather than a single bank, David Mordue of Forward Financial Group compares agency and non-QM asset depletion programs side by side, so you see the qualifying income each one actually produces before you commit to an application.

The process starts online and moves fast. You’ll get personalized consultations, expert rate comparisons across the lenders most likely to approve your specific asset mix, and support gathering the documentation each program requires, whether that’s proof of ownership on a brokerage account or trust paperwork on inherited assets. Because the application is fully digital, many clients see funding in under 21 days once terms are locked in.

Start by running your own numbers through the Rent vs Buy Calculator to see how your assets stack up against a target purchase price, then connect with David Mordue to get a scenario built specifically around your accounts and timeline.

Sources

• Mortgage Lending: Lending Standards for Asset Dissipation Underwriting
• Employment Related Assets as Qualifying Income (Fannie Mae selling guide)
• Freddie Mac guidance (servicing/selling guide excerpt)
• Asset Depletion Mortgage Guide 2026: How the Calculation Works | Defy Mortgage

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