What Are Asset Depletion Loans?

Asset Depletion Loans, also called Asset-Based Mortgages, allow borrowers to use their assets as income to qualify for a home loan. Instead of relying on traditional employment income, the lender calculates a steady monthly income stream based on your available assets.

This approach is ideal for retirees, self-employed borrowers, or high-net-worth individuals who have significant liquid assets but limited reportable income.

At North Star Mortgage Network, we follow Fannie Mae (DU) and Freddie Mac (LPA) guidelines to help clients across Florida qualify using their real financial strength — not just their paychecks.

How Asset Depletion Income Is Calculated

When using assets as a basis for qualifying income, underwriters determine a “monthly income” figure based on your verified, accessible assets. Here’s how it works:

  1. Document eligible assets such as retirement accounts, investment portfolios, or lump-sum distributions.

  2. Subtract any penalties or costs that would apply if those assets were fully liquidated today.

  3. Deduct amounts needed for your down payment, closing costs, and required reserves.

  4. Divide the remaining balance by 360 months (for Fannie Mae) or 240 months (for Freddie Mac) to calculate monthly qualifying income.

This amount is then used in your debt-to-income (DTI) ratio, allowing you to qualify for a mortgage based on assets rather than employment.

Eligible Assets for Asset Depletion Loans

Assets must be liquid, vested, and readily available to the borrower. Common eligible asset types include:

  • 401(k), IRA, SEP, and Keogh retirement accounts (borrower must have full access without restriction)

  • Severance packages or lump-sum retirement distributions (documented via Form 1099-R or employer letter)

  • Stocks, bonds, and mutual funds (70% of value counted to account for market fluctuation)

  • Cash, savings, or money market accounts if sourced from eligible employment-related assets

  • Depository and securities accounts held in the borrower’s name

The borrower must be the sole owner of the assets being used, and all accounts must be immediately accessible.

Ineligible Assets

Some assets cannot be used for income qualification, including:

  • Unvested stock options or restricted stock

  • Pending lawsuit settlements

  • Lottery winnings, gifts, or borrowed funds

  • Inheritance funds not yet received

  • Real estate or business ownership interests

Checking and savings accounts are only eligible if their funds originated from an employment-related asset (for example, a severance package or lump-sum retirement payout).

Loan Eligibility Requirements

Fannie Mae (DU) Asset Depletion Loans:

  • 1- to 4-unit primary residences or second homes

  • Purchases and rate-term refinances only

  • Maximum 70% LTV/CLTV/HTLTV

  • Up to 80% LTV allowed if borrower (or all joint owners) is at least 62 years old at closing

  • Assets divided by 360 months to calculate income

Freddie Mac (LPA) Asset Depletion Loans:

  • 1- to 2-unit primary residences or second homes

  • Purchases and rate-term refinances only

  • Maximum 80% LTV/CLTV/HCLTV

  • Assets divided by 240 months to calculate income

In both cases, assets must be fully vested, immediately accessible, and not already used as a source of recurring income.

Documentation Required

To qualify, borrowers must provide clear documentation verifying ownership and accessibility of funds, such as:

  • Most recent asset account statements (monthly, quarterly, or annual)

  • Employer distribution letter or Form 1099-R for lump-sum payments

  • Account statements verifying deposits and balances

  • Evidence that any applicable penalties have been deducted from asset calculations

These documents confirm that the borrower has unrestricted access and full control over the assets being used for qualification.