How Jumbo Loan Asset Depletion Rules Work for a Second Home

The Quick Read: Asset depletion on a jumbo second home turns a verified pool of liquid assets into a notional monthly income figure, and each lender writes its own version of the formula. The borrower never has to sell or withdraw anything. The variables that change on a second home are occupancy, leverage and reserves.

• Qualifying income comes from eligible assets, minus funds committed elsewhere, divided by a lender-set depletion period.
• Down payment, closing costs and required reserves come out of the pool before the math runs.
• Home equity does not count as an asset. Retirement and market-linked accounts are usually discounted.
• A second home must be used personally. A property rented out regularly is an investment property and falls under different rules.
• Everything is subject to lender guidelines, credit review and property review. Nothing here is a commitment to lend.

Picture a retired couple with a large brokerage account, a pension and a modest paycheck history. They want a lakeside second home priced above the conforming limit. Their reportable income looks thin. Their balance sheet does not. This product exists for that gap. The sections below walk through how underwriting treats the file, step by step, and where the general rule breaks.

Why Can a Jumbo Lender Use Assets Instead of Paycheck Income?

A jumbo lender can use assets because jumbo loans sit outside the agency rulebook, so each lender sets its own standards. Federal ability-to-repay rules still apply to owner-occupied loans. They require a lender to document what it relied on, not to follow one formula.

A jumbo loan is a loan above the conforming limit for the county. The baseline one-unit limit is $832,750, and the high-cost ceiling is $1,249,125, per NAHB’s summary of the FHFA limits. Above those figures, Fannie Mae and Freddie Mac eligibility does not control the file. The lender or the investor buying the loan writes the guidelines.

That freedom has a boundary. A second home is owner-occupied, which makes it a consumer mortgage. The CFPB’s ATR/QM compliance guide lists current or expected income or assets as the first of eight factors a lender must consider. Its examples of assets include savings, vested retirement amounts, stocks, bonds and CDs. The guide also says the rule does not set comprehensive underwriting standards, so lenders pick their own as long as they verify what they rely on. That is why no single national divisor exists.

Across the wholesale network Lendmire works with, this shows up in practice. Two lenders can look at the same brokerage statement and produce noticeably different qualifying income. The difference lives in the divisor and the haircuts, not in the account balance.

Key Terms Defined

Asset depletion: A method that converts verified liquid assets into a notional monthly income figure for qualifying.

Divisor (depletion period): The number of months the lender divides the usable asset pool by.

Haircut: A percentage discount applied to an asset type to reflect taxes, penalties or price swings.

Usable asset pool: Eligible assets after haircuts, minus the down payment, closing costs and reserves.

Notional income: The calculated monthly figure used for qualifying; the borrower never has to withdraw it.

Reserves: Liquid funds a lender requires the borrower to keep after closing, with the required amount varying by lender, program and file.

How Does the Calculation Work, Step by Step?

The calculation runs in six steps: list eligible assets, apply haircuts, subtract committed funds, divide by the divisor, add other income and test the full payment. Each lender sets the haircuts and the divisor, so results vary by program.

1. Inventory eligible assets. Checking, savings, money market, CDs, brokerage accounts and vested retirement accounts are the usual categories. Real estate equity is excluded, because the ATR factor counts assets other than the value of the property securing the loan.

2. Apply haircuts. Cash usually counts at or near full value. Stocks, bonds and retirement accounts are usually discounted for taxes, penalties and volatility. Haircut levels differ by lender, so no universal percentage applies.

3. Subtract committed funds. The down payment, cash to close and required reserves come out first. Practitioner commentary on CFPB supervisory findings, published by Lexology, notes that a down payment cannot count as an asset for ability-to-repay purposes. That commentary is dated, so treat it as background.

4. Divide by the divisor. The result is notional monthly income. Shorter divisors produce more income from the same pool. Longer ones produce less.

5. Add other income. Pension, Social Security, part-time earnings or documented deposits can sit alongside the asset income. It does not have to stand alone.

6. Test the full payment. The lender counts the second-home payment with taxes, insurance and HOA dues, plus other debts, against the combined income.

Underwriters still verify everything they rely on with reasonably reliable third-party records. Practitioner commentary from CFS Review points out that even an assets-based file must consider debt-to-income or residual income. “No documentation” is the wrong mental model. The documentation simply shifts from pay stubs to statements.

Which Assets Usually Count?

The percentages behind these haircuts differ lender to lender, which is why a broker comparing several programs can find a meaningfully better fit than a single bank’s calculator suggests.

A Worked Example for a Second Home

Run the numbers on a modeled borrower. All inputs below are illustrative assumptions, not market data, and every qualification is subject to lender guidelines.

Say a borrower holds a mix of cash, a brokerage account and a vested retirement account. The lender applies a lighter haircut to cash, a heavier one to the brokerage account and the heaviest to the retirement account. The haircut total becomes the starting pool. Next, the lender subtracts the down payment, closing costs and six months of reserves. Whatever remains is divided by the program’s depletion period to produce notional monthly income.

That figure is added to the borrower’s pension and Social Security income. The lender then tests the full second-home payment, including taxes, insurance and HOA dues, against the combined total. If the debt-to-income result fits the program ceiling, the deal still has to pass leverage, reserves and occupancy checks. If it falls short, the usual fixes are a larger down payment (which shrinks the pool, so the fix is partial), a longer-tenured asset base, a lower purchase price or a different program with a shorter divisor.

This is the catch. The down payment reduces the pool that creates the income. A bigger down payment lowers the payment but also lowers the notional income. Borrowers often have to test several down payment levels before the file balances.

What Changes Between a Primary Home and a Second Home?

The math stays the same, but occupancy proof, leverage and reserves tighten on a second home. Across the network, second-home leverage generally sits below primary-residence leverage, and reserves tend to run at least as high.

On a primary residence, select lenders offer up to 90% LTV on a purchase or rate-term refinance through bank-statement documentation. The asset-depletion alternative on a primary residence runs up to about 80% LTV. Second homes typically land lower than those primary-residence ceilings, with the exact figure set by the lender, loan size and credit profile. Owner-occupied cash-out on a primary or second home tops out at up to 80% LTV with a fixed expense ratio, or 75% with an accountant-prepared ratio. Loan sizes in this lane generally run from $125,000 to $3,500,000, and reserves commonly sit around six months of the housing payment.

Second homes are consumer mortgages, so owner-occupied disclosure rules apply. A bank-statement loan on a non-owner-occupied rental, including a short-term rental, is a different animal: it is business-purpose and exempt from TRID. Keep the two lanes separate in your planning.

The Two Ways Assets Get Used

Assets can supplement other income or serve as the only qualifier. Most borrowers with a pension or part-time income use the supplement route. Retirees living only on portfolio withdrawals often use the assets-only route.

One rule applies to both. Do not double count. If an account already produces interest or dividends listed as income, the lender will not also divide that same balance for asset income.

Lendmire’s piece Can a Retiree Meet Second-Home Rules on an Asset Depletion Loan? covers the retiree profile in more depth.

Where the General Rule Breaks

Several edge cases change the answer. These are the ones that catch borrowers off guard.

Retirement account age. Treatment commonly shifts around age 59½. A younger borrower may see a deeper haircut on the same retirement balance.

Joint accounts. Ownership matters. Some programs count a joint account only when every owner is a borrower on the loan. The agency-style version of this rule, in the Fannie Mae Selling Guide’s employment-related assets policy, also requires co-owners to be co-borrowers. It limits that method to purchase and limited cash-out refinances on principal residences and second homes, and caps LTV at 70% (80% for owners 62 or older). That is agency contrast only. Jumbo programs are not bound by those conditions and set their own. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.

Cash-out on a second home. Agency-style asset-income policies exclude full cash-out. Select jumbo lanes may allow it, usually with a lower leverage tier. Owner-occupied cash-out runs up to 80% LTV within the program parameters above, never the 90% purchase ceiling.

Occasional rental use. A second home assumes personal use. If the plan is to rent it regularly, the property is an investment property and the file changes. Asset depletion reads the borrower’s personal balance sheet. A rental-focused loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Investment-property cash-out tops out around 75% LTV on the alt-doc side, and investment purchase leverage varies by lender.

Resort and condo-hotel properties. These often push a file out of agency lending, which makes the non-agency route more likely and the lender’s property review more important.

Excluded assets. Business funds, gifts, unvested stock, crypto and many trust holdings are often excluded or limited. Ask before assuming they count.

Common Misconceptions

• “I have to withdraw the money.” No. The calculation is an underwriting exercise, not a distribution schedule.
• “It is a no-doc loan.” No. Statements are verified, and debt-to-income still gets tested.
• “Home equity counts.” No. Property value is excluded from the asset pool.
• “Net worth alone qualifies me.” A large portfolio helps, but pool size after the down payment and reserves is what drives income.
• “One formula applies everywhere.” Divisors and haircuts are program-specific.
• “Asset depletion and rental-income loans are the same.” They are not. One reads personal assets. The other reads the property’s rent.
• “Agency rules apply to my jumbo.” They do not. Jumbo lenders write their own guidelines.

How Does It Compare With Other Paths?

For a second-home buyer, asset depletion is one option among several. Which one fits depends on how the borrower’s income and assets actually look.

If the borrower is self-employed with strong deposits, a bank-statement program that is reviewed on documented income under the applicable program may produce a better result. It works from 12 months of statements and deposit averages, with lender-specific expense factors. For borrowers with a large liquid portfolio but erratic deposits, asset depletion may fit better. If the real goal is a rental, the complete DSCR loans guide is the better starting point, because that lane does not depend on personal assets.

Flip points worth knowing: asset depletion tends to win for retirees and portfolio-heavy borrowers. A bank-statement loan tends to win for business owners with strong cash flow. Paying cash or tapping existing equity may win for someone who wants to avoid the debt-to-income test entirely, though that trades away liquidity.

Tax treatment varies; consult a qualified professional.

Pre-Offer Checklist

1. Gather recent statements for every account you want counted.

2. Document the source of any large or recent deposits.

3. Decide on the down payment range before running the math, since it shrinks the pool.

4. Confirm the property will be used personally, not rented regularly.

5. List other monthly debts so the debt-to-income test is accurate.

6. Check the second-home leverage tier and reserve requirement with the lender before making an offer.

7. Compare more than one program, because divisors and haircuts differ. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.

For a cash-out version of this process, the same asset math applies, with the owner-occupied cash-out ceiling noted above.

If you hold a substantial portfolio and want to see how the numbers work, Lendmire can help you compare bank statement and asset-based options based on your assets, the property, credit profile, leverage and your goals. The brokerage arranges financing through select lenders in its wholesale network. Consumer mortgage licensing for this lane covers 16 states, and every file is underwritten individually. Reach the team at 828-256-2183 or request a quote.

For current guidelines and terms on a personal-use second home, request a quote or call 828-256-2183, since divisors, haircuts and leverage tiers are set program by program.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage brokerage focused on DSCR investor financing, helping arrange programs through wholesale and investor-lending channels in 41 markets, including Washington, D.C. DSCR loans are evaluated by the lender on property cash flow rather than personal income, subject to lender guidelines, supporting LLC closings and accommodating investors with four or more financed properties. Scotsman Guide Top Mortgage Workplace in both 2025 and 2026.

References

1. NAHB: 2026 Conforming Loan Limits

2. CFPB ATR/QM Small Entity Compliance Guide

3. Lexology: CFPB on down payments for non-QMs

4. CFS Review: CFPB Addresses Non-QMs Under Ability-to-Repay

5. Fannie Mae Selling Guide B3-3.4-06