The Quick Read: Lenders count each of your verified accounts at a set percentage called a haircut, add the results, and divide by 60 months to produce a monthly qualifying income that then runs through the debt-to-income test, subject to underwriting and the lender’s own calculation.
- Cash and certificates of deposit count at 100% on the asset depletion path. Securities count at 80%, private stock at 75%, retirement accounts at 70%, and equity in other real estate at 60%.
- A different path, the asset qualifier path, skips income entirely. Your eligible assets, after their credit percentages, must equal or exceed the whole loan amount.
- You pick one path per loan. The two use different tables, and the figures never mix.
- Nothing is sold or pledged. The formula is a qualifying convention, not a withdrawal plan.
- Every figure here is a ceiling or floor on select programs, not an offer, and each file is underwritten individually.
What Is the Asset Depletion Income Formula Actually Doing?
Asset depletion turns a pile of savings into an imaginary paycheck. A retiree with a large portfolio and a small taxable income looks weak on paper, even when the balance sheet is strong. The formula fixes that mismatch.
Here is the sequence on the asset depletion path:
1. List every account you want counted. 2. Multiply each balance by its haircut percentage. 3. Add the results to get your usable assets. 4. Divide usable assets by 60 months. 5. Treat the answer as monthly income and run it through the debt-to-income test.
Debt-to-income, or DTI, compares your monthly debts, including the new housing payment, to your monthly income. The derived figure must carry the full housing payment and your other debts under the program’s DTI limit.
A haircut is a discount applied to an asset’s balance because the lender will not treat every dollar as equally solid. Stocks can fall, and retirement money can be restricted. Equity in a house is not cash. So the lender counts only a share of each balance.
Some programs in the wider market handle this differently. They subtract a withdrawal penalty instead of applying a percentage, or they exclude an asset outright. The programs discussed here use two tools: a percentage discount and a flat exclusion.
Which Path Fits You: Assets as the Loan or Assets as Income?
The first decision is not the formula. It is which path matches your situation. Across the wholesale network Lendmire places files with, the two paths serve different borrowers.
The asset qualifier path covers the whole loan with assets. No employment or income is documented. Your eligible assets, after the percentages below, must equal or exceed the entire loan amount. This path suits someone who sold a business or received an inheritance and holds a large balance but has no paycheck.
The asset depletion path turns assets into income. It suits someone who wants the program to look at monthly cash flow, or someone who holds a mix of securities, cash and retirement money. It also covers investment property, which the qualifier path does not.
Leverage differs by path and by property use. Through select programs and subject to underwriting:
- Qualifier path, principal residence or second home: up to 80% loan-to-value on a purchase and up to 75% on a refinance, with loans up to $4,000,000.
- Depletion path, principal residence or second home: up to 80% on a purchase or rate-and-term refinance and up to 60% on a cash-out refinance.
- Depletion path, investment property: up to 65% on a purchase or rate-and-term refinance and up to 60% on a cash-out refinance.
- Depletion path loan amounts: from $125,000 to $3,500,000.
Whether cash-out proceeds are allowed on the qualifier path is the lender’s decision and is not published, so treat it as a question to ask. Cash-out proceeds never count as qualifying assets on the depletion path.
Haircuts by Asset Type
Each path has its own table. Here is the qualifier path first, where the figure is the share of the balance that counts toward covering the loan.
| Asset (qualifier path) | Share that counts |
|---|---|
| Brokerage accounts | 100% |
| Certificates of deposit | 100% |
| Money market | 100% |
| Savings | 100% |
| 401(k) and IRA, under age 59½ | 90% |
| 401(k) and IRA, age 59½ or older | 100% |
Accounts combine, so you can add them together to reach the loan amount. Age matters on this path only for retirement money.
Now the depletion path, where the figure is the share that counts before dividing by 60.
| Asset (depletion path) | Share that counts |
|---|---|
| Cash accounts | 100% |
| Certificates of deposit | 100% |
| Securities | 80% |
| Private stock | 75% |
| Retirement accounts, any age | 70% |
| Equity in other real estate | 60% |
The logic follows risk. Cash does not move, so it counts in full. Securities swing with the market. Private stock is hard to sell at a known price. Retirement money can be restricted, and real-estate equity needs a sale or a new loan to reach.
Several assets are not eligible on the depletion path at all: custodial accounts, deferred compensation, escrow accounts, foreign funds, cash on hand, stock options, non-vested restricted stock units, and funds from non-regulated financial companies.
A Worked Example, in Order
These numbers are illustrative, and the lender’s own calculation governs. They use the same percentages and divisor as the tables above.
Depletion path. A borrower holds $1,500,000 in securities and $300,000 in cash.
- Securities: $1,500,000 at 80% counts as $1,200,000.
- Cash: $300,000 at 100% counts as $300,000.
- Usable assets: $1,500,000.
- Divided by 60 months: $25,000 of monthly qualifying income.
That $25,000 then carries the housing payment and other debts through the DTI test. The result is an income figure, not an approval.
Qualifier path. A borrower seeks an $800,000 loan.
- Brokerage accounts: $330,000 at 100% counts as $330,000.
- A 401(k), borrower under 59½: $300,000 at 90% counts as $270,000.
- Savings: $200,000 at 100% counts as $200,000.
- Total: $800,000 of usable assets.
Usable assets equal the loan amount, so the borrower is reviewed on assets alone, subject to underwriting. No income calculation happens at all.
Why the Order of Operations Matters
Most mistakes come from skipping the haircut or counting the wrong balance. Three show up again and again.
Skipping the haircut. Using the raw $1,800,000 from the example above would suggest a noticeably higher monthly income than the correct figure produces. The correct calculation applies the haircut first, so the shortcut overstates income by a meaningful margin each month. Online calculators often make exactly this error.
Changing the asset mix. Suppose the same borrower held the $1,500,000 in retirement accounts instead of securities. That block would count at 70%, or $1,050,000. Add the $300,000 in cash, and usable assets are $1,350,000. Divided by 60, income falls to $22,500. The balances are identical, but the account type moves the answer.
Forgetting what you spend. A down payment and closing costs leave your accounts when you pay them. A larger down payment therefore leaves less behind to count. Strong borrowers sometimes put a lot down and then find the qualifying income has shrunk. The lender’s calculation sets exactly how this is netted out, so ask before you wire anything.
What the Lender Needs to See
The assets are documented on both paths. Each program requires proof that the money exists and has been yours for a while.
Seasoning is the waiting period an asset must sit in your account before it counts. The two paths differ:
- Qualifier path: 60 days of seasoning and two months of statements for each qualifying account.
- Depletion path: statements at least 120 days old at application, plus the most recent statement dated within 45 days. Funds from the sale of a business, an inheritance or a legal settlement are excused from that seasoning.
Credit also differs. The qualifier path publishes a 600 minimum score. The depletion path follows the lender’s score and loan-amount matrix, so ask for the matrix rather than a single number. A first-time investor on the depletion path needs a 700 score. Housing history is expected to be 0x30x12, meaning no 30-day lates in twelve months, though one late payment is considered case by case. Multiple bankruptcies are not eligible, and a housing event such as a foreclosure needs four years of seasoning on the depletion path.
Minimum assets apply to the depletion path. Qualified assets must be at least the lesser of $1,000,000 or 1.25 times the loan balance. When asset depletion is the only income source, assets can never fall below $250,000 liquid.
Reserves are lighter than most borrowers expect. The qualifier path requires none at or below 75% loan-to-value, and the lender sets them above that. The depletion path publishes no reserve months.
Where the General Rule Breaks
The formula is tidy. These edge cases are where files get stuck.
Crypto, metals and collectibles. Cryptocurrency, precious metals, collectibles, and pledged or borrowed funds are not published as eligible on either path. The documented route is converting them into a seasoned cash balance in a regulated account, with the lender reviewing the source of the funds. They never count at a percentage.
Business accounts. Only your ownership share of a business account is in play, and even that is not published as a counted asset class. The same conversion route applies.
Retirement accounts and taxes. You do not withdraw from a retirement account to qualify. The balance simply counts at its percentage. Tax treatment varies, so consult a qualified tax professional before relying on any deduction.
Assets that supplement income. If you have documented income, such as a pension, asset-derived income can supplement it up to a 45% DTI. When assets supplement income, the minimum-assets rule is waived.
The home being financed. Equity in the house you are buying cannot count as an asset. The CFPB’s small entity compliance guide says lenders consider assets other than the dwelling that secures the loan. Equity in a different property can count at 60% on the depletion path.
No single national formula. The ability-to-repay rule lists income or assets among its eight minimum factors, but it does not set a haircut or a divisor. A Thomson Reuters summary of the rule’s amendments notes that it prescribes no specific underwriting method and expects lenders to keep written policies. That is why percentages and divisors differ between programs.
Agency programs, the ones tied to Fannie Mae and Freddie Mac, use their own rules for assets. Those rules are not this program’s, so never carry an agency percentage or term into this math.
Asset Depletion or DSCR?
The two answer different questions. Asset depletion looks at you: your balances become income, and your DTI is tested. This program is a consumer mortgage, so standard consumer disclosures apply.
DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, the file is structured differently from a standard owner-occupied mortgage. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.
If your plan is a pure rental purchase where the rent carries the loan, DSCR is usually the natural fit. If tax write-offs have cut your documented income but your balance sheet is large, asset depletion can carry a purchase of a home or an investment property. The complete DSCR loans guide covers the rental side in full.
The more telling comparison might be this one. A borrower with large assets but only a modest rental ratio on the target property may do better on asset depletion. A borrower with a strong rental ratio and thin liquid assets will usually do better on DSCR. Which wins depends on the file.
Questions to Ask Any Lender
Across the programs a broker sees, the structure looks alike but the settings do not. Before you commit to a path, ask for these items in writing:
- Which path does the program use, assets covering the loan or assets converted to income?
- What percentage applies to each account type you hold?
- What is the divisor?
- Is the down payment netted out before or after the division?
- What are the seasoning and statement-age rules?
- What credit matrix applies to your loan size?
- What is the maximum leverage for your property use?
A broker is useful here because one borrower can be compared across several sets of guidelines. The strictest overlays tend to cut deepest on account types and statement age.
Key Terms Defined
Haircut: the percentage discount a lender applies to an asset’s balance, so only part of it counts.
Divisor: the number of months used to spread usable assets into monthly income, which is 60 on the depletion path here.
Usable assets: the total of all balances after haircuts, before the divisor.
Debt-to-income (DTI): the share of monthly income that goes to debts, including the new housing payment.
Seasoning: the time an asset must sit in your account, or a statement must age, before it counts.
Asset qualifier path: the route where eligible assets must equal or exceed the whole loan, with no income documented.
Asset depletion path: the route where assets become monthly qualifying income.
Frequently Asked Questions
Do I have to sell my investments to qualify?
No. The formula is a qualifying convention. Nothing is sold, withdrawn or pledged, and the property remains the collateral.
Can asset depletion income be my only income?
Yes, on the depletion path, subject to minimums. 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 it is your only income source. If it supplements documented income, the minimum-assets rule is waived, up to a 45% DTI.
Why do retirement accounts count for less?
Retirement money carries more restrictions and is harder to reach. On the depletion path it counts at 70% at any age. On the qualifier path it counts at 90% under age 59½ and 100% at 59½ or older.
Does a bigger down payment lower my qualifying income?
It can, because money you pay at closing leaves your accounts, so less remains to count. The lender’s own calculation sets how this is netted out, so ask before you decide how much to put down.
Why do two lenders give two different answers?
Each program sets its own haircuts, divisor, seasoning and credit matrix. The regulatory framework does not fix a universal formula, so the same balances can produce different incomes under different programs.
Next Step
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 mortgage broker, not a lender, and arranges these loans through select programs, subject to underwriting. Its consumer mortgage lending is licensed in Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia and Washington. Call 828-256-2183 to talk through your accounts.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. Bank statement, P&L-only, 1099-only and asset-based mortgages are arranged through wholesale lending partners for borrowers whose tax returns understate their income, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. CFPB ATR/QM Small Entity Compliance Guide
2. Federal Register: Ability-to-Repay and Qualified Mortgage Standards Under the Truth in Lending Act
3. Thomson Reuters: CFPB amends ATR/QM rule
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Does an Asset Depletion Loan Require Any Income? · How Asset Depletion Counts Income for a Rental Portfolio Buyer · How to Qualify for an Asset Depletion Jumbo Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.