An Asset Depletion Loan is a great program for helping home buyers qualify for a loan despite not having “enough” verified income on their tax returns.
Asset Depletion qualifying is where the lender will derive an income from the borrowers assets and add it to their verifiable income from their tax returns. What assets are acceptable for Asset Depletion?
· Cash or cash equivalent
· Money market accounts, savings accounts, checking accounts
· Trust Funds
· Investment portfolios: stocks, bonds, mutual funds, etc.
· Retirement accounts (but only if the borrower is of retirement age: 62)
Johnny Jet, who is 55 years old, wants to purchase a home in Santa Monica. He needs a $1,000,000 loan to complete the transaction but shows $100,000 yearly income on his tax returns. He currently has $2,000,000 in his money market account*. The lender will amortize his $1,650,000 over 30 years, assuming a 4% return this will result in additional income of $5,500. We then add that to his verifiable income of $8,333 a month which would give him a total of $13,833. to qualify for the new loan.
*Program Guidelines are subject to change. Trust Funds, Investment Portfolios and Retirement accounts qualify at a reduced rate. Please contact us to discuss your specific scenario.