The Quick Read: Usually 70% of the balance counts on the asset depletion path, and that is the figure through select programs in Lendmire’s wholesale network, subject to underwriting. A Roth IRA is treated like any other retirement account, with no special Roth rate and no age test on that path. The counted amount is divided by 60 months to produce monthly qualifying income, and the lender’s own calculation governs.
- On the asset depletion path, retirement accounts, Roth included, count at 70% at any age.
- On the asset qualifier path, retirement balances count at 90% under age 59½ and 100% at 59½ or older.
- Nothing is sold or withdrawn. The Roth stays invested and keeps growing.
- A rental investor on a DSCR loan generally gets zero income credit from a Roth, only reserve value.
- Asset-based mortgages run on a consumer purpose, and investment property is eligible only on the depletion path.
What Does “Counts Toward Income” Actually Mean?
Counting is a qualifying convention. The lender takes a statement balance, applies a percentage, and treats the result as spendable wealth. Nothing leaves the account.
Two paths exist, and a borrower is qualified on one at a time. The asset qualifier path covers the whole loan with eligible assets and documents no employment or income. The asset depletion path divides usable assets by 60 months into a monthly income, and that income runs through the debt-to-income test. Every figure below names its path, because blending the two tables is the most common way borrowers misread this topic.
Assets are documented on both paths. Skipping income documentation never means skipping documentation.
How Much of the Roth Counts on Each Path?
Across the programs placed through the network, the Roth sits in the retirement bucket. Here is how that bucket is treated.
| Factor | Asset depletion path | Asset qualifier path |
|---|---|---|
| Retirement credit | 70% at any age | 90% under 59½, 100% at 59½+ |
| What the credit does | Becomes income via 60-month divisor | Counts toward covering the loan |
| Brokerage / securities | Securities 80% | Brokerage 100% |
| Cash and CDs | 100% | 100% (plus money market, savings) |
| Purchase leverage | Up to 80% primary or second home; 65% investment | Up to 80% primary or second home |
All figures are typical ceilings through select programs, subject to underwriting. They are not offers.
Run the shape of the sanctioned math. Say a borrower holds $1,500,000 in securities and $300,000 in cash, with no Roth. Securities count at 80% ($1,200,000) and cash at 100% ($300,000), so usable assets are $1,500,000. Divided by 60 months, that is $25,000 of monthly qualifying income, which must carry the housing payment and other debts through the debt-to-income test. Now swap in a Roth. Every dollar of Roth balance would count at 70% in that same pool, so it contributes less than the same dollar held in securities or cash.
That is the real cost of using a Roth for income. A dollar in cash does more work than a dollar in a retirement account.
On the qualifier path, the Roth does better. An $800,000 loan could be covered by $330,000 in brokerage (100%), $300,000 in a 401(k) under 59½ (90%, or $270,000) and $200,000 in savings (100%). Those add up to $800,000 of usable assets, and the file can qualify on assets alone, subject to the lender’s review. A Roth IRA would sit in that same retirement line.
Is There a Special Roth Rate?
No. Most programs apply one retirement haircut, and the Roth shares it with traditional IRAs and 401(k)s. The tax drag differs between those accounts, which is why the Roth sometimes feels like it deserves better treatment, but the program percentage does not make the distinction.
The logic of the discount is simple. A haircut stands in for the cost and friction of turning a retirement balance into cash. A traditional IRA carries income tax on withdrawal. A Roth is different, because contributions were taxed already.
Vanguard’s IRA withdrawal rules confirm that Roth contributions can be withdrawn without taxes or penalties, while earnings taken before 59½ are generally taxed and carry a 10% federal penalty. So a Roth’s real accessible value is often larger than a traditional account’s. Still, a lender sets one percentage per account class. Whether any program recognizes contribution basis separately is a question for that program, and the published guidelines here do not treat it that way.
Contributions, Earnings and the Five-Year Rule
The five-year rule matters for access, even when the program percentage ignores it. It is the reason a Roth balance is not always as liquid as it looks.
IRS Publication 590-B sets the ordering. Roth distributions come out as regular contributions first, then conversions, then earnings. Each conversion carries its own five-year period for the 10% additional tax. A recent conversion can therefore make part of the balance harder to reach without cost.
There is a second clock for qualified distributions. The five years governs tax-free treatment of earnings, not whether you can touch the money.
Here is the trap. An owner can reach 59½ and still lack qualified distributions if the five-year test is unmet. Empower’s Roth withdrawal guidance flags exactly that. For asset depletion, it rarely changes the percentage. It does change how comfortable you should feel treating the full balance as available cash.
Roth IRA vs. Traditional IRA vs. Roth 401(k)
| Account | Tax on withdrawal | Lender treatment |
|---|---|---|
| Roth IRA | Contributions free; earnings rules apply | Retirement bucket |
| Traditional IRA | Taxed as income | Retirement bucket |
| Roth 401(k) | Qualified rules apply | Retirement bucket; vesting and access reviewed |
A Roth 401(k) is a different plan from a Roth IRA. Q3 Advisors notes that a Roth 401(k) has no first-home exception, which a Roth IRA has. Employer-plan accounts also get a closer look on vesting and access, so expect more questions on those files.
Under 59½: What Changes?
On the asset depletion path, nothing changes. Retirement accounts count at 70% at any age. A 45-year-old and a 65-year-old with the same Roth balance get the same percentage.
On the asset qualifier path, age does matter. Retirement balances count at 90% under 59½ and 100% at 59½ or older. The younger borrower gives up ten points of credit, but still qualifies if total usable assets cover the loan.
Use this decision order:
1. Does the borrower want to document no income? Look at the qualifier path first. The assets must cover the entire loan.
2. Are the assets enough to cover the loan, but only after counting the retirement account at 90%? The qualifier path may still work.
3. Is the loan too large for assets alone, or is the property an investment property? The depletion path is the only fit for investment property, with assets turned into income.
Other asset classes such as crypto, precious metals or collectibles are not published as eligible on either path. The documented route is converting them to a seasoned cash balance in a regulated account, with the source reviewed.
Roth for Income, Reserves or Down Payment: The Double-Counting Trap
One balance cannot do three jobs. If the Roth supports qualifying income, then funds used for the down payment and closing costs come out of the pool before the divisor is applied. Borrowed or pledged funds do not count at all, and cash-out proceeds never count as qualifying assets.
Say a borrower earmarks the same Roth dollars for the down payment and for the income calculation. A lender subtracts the committed funds first, and the income number shrinks. Plan the pool once, then divide.
Minimums apply on the depletion path. Qualified assets must be at least the lesser of $1,000,000 or 1.25 times the loan balance, and never below $250,000 liquid when asset depletion is the only income source. Asset-derived income can instead supplement documented income up to a 45% debt-to-income ratio, and then the minimum-assets rule is waived.
Documents and Seasoning
Expect custodian statements that show account type and ownership. The timing rules differ by path:
- Asset qualifier path: 60 days of seasoning and two months of statements for each qualifying account.
- Asset depletion path: statements at least 120 days old at application, plus the most recent statement within 45 days. Sale-of-business, inheritance and legal-settlement funds are excused from that seasoning.
Credit follows the path as well. The qualifier path has a 600 minimum score. The depletion path follows the lender’s matrix, and a first-time investor there needs 700. Housing history is typically 0x30x12, and multiple bankruptcies are not eligible.
Does a Roth Help a Rental Investor on a DSCR Loan?
Rarely as income. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. A Roth balance never enters that ratio. It shows up as down payment and reserves.
That makes the choice between lanes a property question. If the rent comfortably covers the monthly obligation, DSCR is the cleaner fit, and the Roth simply supports liquidity. Programs below 1.00 coverage are available through select lenders in the network, but leverage and terms adjust. If rent falls short and the portfolio is deep, the asset depletion path may carry the file instead. Investment property there is limited to 65% on a purchase or rate-and-term refinance and 60% on a cash-out, so the borrower trades leverage for flexibility.
Lendmire’s complete DSCR loans guide lays out how the rent-based lane works.
Keep the numbers separate. The Roth’s imputed income never goes into a DSCR ratio.
Common Mistakes
- Assuming the full balance counts. On the depletion path, retirement accounts count at 70%. Cash is the asset that comes closest to full credit.
- Hunting for a Roth-specific rate. Programs group the Roth with other retirement accounts.
- Thinking you must withdraw. Nothing is sold or withdrawn. The balance is a qualifying convention.
- Believing Roth money is locked for five years. The five-year period governs tax-free earnings, not access.
- Treating the two paths as one table. The qualifier path and the depletion path use different percentages and different leverage.
- Counting the same dollars twice. Down payment, closing costs and reserves come off the pool first.
- Assuming volatility is harmless. A securities-heavy pool can move between statements, and the lender’s calculation uses what the statements show.
Wrong Page? Other Meanings of “Counts as Income”
Benefit programs, financial aid forms, Medicare surcharges and Social Security taxation each treat retirement accounts under their own rules. None of those govern a mortgage. This article covers how a mortgage lender converts a Roth balance into qualifying income.
Key Terms Defined
Asset depletion: A qualification method that converts eligible assets into monthly income by dividing them over a fixed period.
Haircut: The percentage by which a lender discounts an asset’s balance before counting it.
Divisor: The number of months, 60 on this program, used to turn usable assets into monthly income.
Qualified distribution: A Roth withdrawal that is tax-free and penalty-free because the five-year rule and a triggering event, such as age 59½, are both met.
Seasoning: The length of time funds must sit in an account before a lender counts them.
Frequently Asked Questions
Do I have to withdraw money from my Roth IRA to use it?
No. Nothing is sold or withdrawn. The balance is counted as a qualifying convention, and the account stays invested and keeps growing. Tax treatment varies; consult a qualified professional before relying on any tax outcome.
Does a Roth IRA count at a higher rate than a traditional IRA?
No. Most programs apply one retirement percentage to both. On the depletion path, that is 70% at any age. The Roth’s friendlier tax profile helps your actual liquidity, but it does not raise the lender’s percentage.
Can I combine a Roth with brokerage and cash?
Yes. Accounts combine, and each asset type is counted at its own percentage. The pool is then reduced by funds committed to the down payment and closing costs before the 60-month divisor is applied.
Is a Roth 401(k) treated the same as a Roth IRA?
Usually in the same retirement bucket, but employer-plan accounts get extra review on vesting and access. The two plans also follow different withdrawal rules, so expect more documentation on a Roth 401(k).
What if the balance drops before the file is reviewed?
The lender works from the statements it receives, so a drop lowers the counted amount. A securities-heavy Roth is more exposed than one held in cash-like funds. Reviewing a fresh statement before applying avoids surprises.
If you are qualifying on assets rather than income and want to see how the numbers work, Lendmire can help you compare asset-based mortgage options based on your statements, the property, credit profile, leverage, and your goals. Lendmire is a broker arranging financing through select lenders in its wholesale network, and every file is underwritten individually. A Roth balance is easiest to plan around when you know up front whether it will serve as income, reserves or both.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges bank statement, P&L-only, 1099-only and asset-based home financing in 16 states through wholesale lenders, on primary residences, second homes and investment properties. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your home or investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Vanguard IRA withdrawal rules
3. Empower, Roth IRA withdrawal rules
4. Q3 Advisors, qualified distribution
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much Do You Need in Assets for an Asset Depletion Loan? · How Much Can a Retiree Borrow on a Jumbo Loan Using Asset Depletion? · How Lenders Decide Which Sale Proceeds Count Toward Asset Depletion
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.