Asset depletion loans: qualified on the balance sheet, not a paycheck

Asset depletion takes money you already hold and converts it into a monthly income figure the file can qualify on. Usually nothing is sold and nothing is withdrawn, because the lender is agreeing to read your balance sheet as though you were paying yourself out of it.

What it is

The calculation is arithmetic, and most programs work in broadly the same order. Start with the accounts you want counted, apply the discount each type of asset carries, subtract the money you need for the down payment, closing costs and required reserves, then divide what is left by the number of months the program uses. That last figure is your notional monthly income. It drops into the debt-to-income calculation where a paycheck would, and the rest of the file is underwritten the way a full documentation file is, so credit, equity, reserves and the property all still matter.

What counts, and how heavily it is discounted, tracks how quickly the money could become spendable cash. Checking, savings and money market balances are commonly counted at or close to full value. Stocks, bonds and funds in a taxable brokerage account are usually discounted, because the balance can move between application and closing. Retirement accounts are the most conditional piece: most programs want to see that you can draw on the account without an early withdrawal penalty, which generally turns on your age and the plan's own rules, and many apply a heavier discount to cover the tax a withdrawal would trigger. Money you cannot freely reach counts for little or nothing, an employer plan still closed to you and unvested shares among them, and anything pledged as collateral is commonly excluded. A business account falls in between, taken on conditions by some programs and not looked at by others.

The income this produces is almost always smaller than people expect, and that is the part worth absorbing before you get attached to the idea. A portfolio that feels substantial can yield a modest qualifying figure once the discounts come off, the closing funds and reserves are carved out, and the remainder is spread across a term. The number also depends on which lender is doing the dividing, because the term they use is not standard. We run the arithmetic against your real statements early, so the conversation is about a figure you can see rather than one you are hoping for.

Who it fits

• Retired investors with real balances and a tax return that shows very little taxable income.
• Anyone who recently sold a business or a property and is holding the proceeds without a current paycheck.
• Self-employed buyers whose returns are written down to almost nothing while their accounts are not.
• Buyers of a property that will not cover its own payment on a coverage test, where the assets can do the qualifying instead of the rent.

What we will need

• Recent statements for every account you want counted, all pages, including the ones that look like boilerplate.
• Which accounts are yours alone and which are joint or held by an entity. Ownership changes what can be counted.
• Your age and the withdrawal terms on any retirement account, since that is usually what decides how the balance is treated.
• The cash you intend to put toward the down payment, closing costs and reserves. That comes out before the depletion math, not after.
• Your credit profile and the property details. Asset depletion answers the income question and leaves every other one in place.

The honest trade

• Pricing runs above full documentation. Most of these programs sit outside the qualified mortgage rules conventional lending follows, and the rate and the fees carry that difference. Narrower asset based options do exist inside conventional lending, with tighter rules about which accounts can be used, which is why we look there first.
• The qualifying income usually lands lower than the balances suggest. The discount, the carve-out for closing funds and reserves, and the division across a term all cut the same pile down, and whatever survives is the figure the payment has to fit inside.
• Market exposure works against you in underwriting. Brokerage balances are commonly re-verified close to closing, and a balance that has fallen since the application can shrink the income the file was built on, which can mean a smaller loan or a restructure late in the process.
• Fewer lenders offer this, and the ones that do write the rules differently. Discount schedules, the term they divide by and retirement account treatment all vary, so a file that works at one lender can fail at the next, and the retirement balance is usually where it fails.

Questions

Which of my assets actually count?

Broadly, the easier the money is to reach, the more of it counts. Cash in a bank account is the strongest form, a taxable investment balance is usually taken at a discount for market risk, and a retirement balance is counted conditionally and often cut harder still. What tends to be excluded is anything you cannot freely reach: an operating account for a business, unvested shares, anything pledged as collateral, and in most cases equity in real estate, which is not liquid however large it is. We go account by account rather than guessing from a total.

How are retirement accounts treated?

This is usually the hinge of the file. What most programs ask is whether the balance is genuinely available to you now, which generally comes down to your age and the terms the plan itself sets, and whether reaching it early would cost a penalty. Many lenders discount a retirement balance more heavily than a taxable one, on the view that tax would come out of any withdrawal. A plan held with an employer you still work for, closed until you leave, is commonly left out. Nobody is asking you to withdraw anything. Whether you could is the part that decides how the balance is read.

Do I have to sell anything or move money?

Usually not. The depletion figure is notional, which is the whole appeal of the program: your positions stay where they are and keep doing whatever you bought them to do. What lenders do require is money that is verifiable, seasoned and genuinely available to you, which means statements rather than screenshots and an explanation for any large deposit. Assets held outside a conventional financial institution, cryptocurrency among them, commonly have to be converted and seasoned before they can be counted. Funds earmarked for the down payment and reserves still have to be there at closing.

How is this different from a DSCR loan?

They solve different problems. A DSCR loan sets you aside and asks whether the property's rent covers the payment. Asset depletion sets the rent aside and asks whether your balance sheet can stand in for a paycheck, then runs an ordinary debt-to-income calculation on that figure. If the rent carries the property comfortably, DSCR is usually the simpler file, and it does not care what you hold. If it does not, and the assets are substantial, depletion is the one worth pricing. Some files qualify either way and the terms decide it, so we run both. Both cost more than full documentation.