The Quick Read: Yes, once the money is paid out and sitting in the borrower’s own account, and the paper trail ties it to the settlement. A settlement is not a special asset class, and it is not seasoned on the day the check clears. On the asset depletion path, select lenders in Lendmire’s wholesale network excuse legal-settlement funds from the statement-age rule. On the asset qualifier path, the standard 60-day seasoning rule is the working assumption, subject to underwriting.
- A pending case or an expected award is not an asset. Only money in the account counts.
- Seasoned means held in an account for a period. Sourced means traced to a documented origin. Settlement money is easy to source and still has to be sourced.
- On the asset depletion path, settlement funds are excused from the statement-age rule. Other eligibility rules still apply.
- Periodic payments from a structured settlement are an income stream, not seasoned cash.
- Funds held in an attorney’s trust account are not yours on paper until they reach your account.
Seasoned vs. Sourced: Two Different Tests
Seasoned money has sat in an account long enough for a lender to treat it as the borrower’s own. Experian describes seasoned funds as money that has typically been in your account for at least 60 days. It says lenders review recent large deposits to confirm the money is not undisclosed borrowed money, and that depositing early can reduce the sourcing paperwork.
Sourced money has a documented origin. A settlement is strong on this test, because a signed agreement and a disbursement statement trace the money to a court-recognized event.
Inside a file, the two tests produce different conditions. Seasoning is a clock. Sourcing is a packet. A settlement deposit that arrives last week fails the clock and can still pass the packet. That difference is why the rule depends on the program.
How a Settlement Is Treated, Stage by Stage
The stage the money is in decides whether it counts at all.
| Stage | Counts as an asset? | What the file needs |
|---|---|---|
| Pending case or expected award | No | Nothing to verify yet |
| Settled, held in attorney trust | Not yet | Disbursement statement; transfer to your account |
| Received and deposited | Yes, if sourced and eligible | Agreement, disbursement statement, statement showing deposit |
| Structured (periodic payments) | Income stream, not cash | Administrator documentation |
Money not yet received cannot be verified as liquid. That one rule removes most of the confusion. A lawsuit that is going well is a good thing to have. It is not a balance on a statement.
What Documents Prove a Settlement
Most lenders in the network want the same short packet. The exact list is set by the lender and the program, and every file is underwritten individually.
1. The executed settlement agreement or release. It names the parties and the amount.
2. The attorney’s closing or disbursement statement. It shows gross proceeds, fees, liens and the net paid to the client.
3. Proof of the wire or check. It connects the net amount to the deposit.
4. The bank statement showing the deposit. The deposit amount and date must match the disbursement statement.
Settlement money usually moves through the law firm’s trust account. The firm pays attorney fees and any liens first. The borrower then gets the net. The net is the figure that matters. A headline settlement of a given size can leave far less usable cash, and underwriters count the net, not the headline.
A clean packet is the reason a settlement deposit usually clears a large-deposit flag. It is a court-documented event, which is easy to trace. Experian notes that lenders season funds to guard against undisclosed borrowing, and a settlement packet answers that concern directly.
How the Two Qualifying Paths Treat Settlement Funds
Lendmire arranges asset-based mortgages for consumers through select lenders in its wholesale network. These are consumer loans on principal residences and second homes, and on investment property only on the asset depletion path. Lendmire is a broker and does not lend. A borrower is qualified on one path at a time.
Asset qualifier path. Eligible assets, after the credit percentages, must equal or exceed the entire loan amount. No employment or income is documented. Brokerage accounts, certificates of deposit, money market and savings count at 100%. Retirement balances count at 90% under age 59½ and 100% at 59½ or older. The path asks for 60 days of seasoning and two months of statements on each qualifying account. A fresh settlement deposit is typically handled by letting it age, or by sourcing it, subject to underwriting. Credit starts at a 600 minimum score.
Asset depletion path. Eligible assets are cut by the program haircuts and divided by 60 months to create a monthly qualifying income. That income carries the housing payment and other debts through the debt-to-income test. Cash and certificates of deposit count at 100%, securities at 80%, private stock at 75%, retirement accounts at 70%, and real-estate equity at 60%. Statements must be 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. This is the path where a recently received settlement does the most work.
Excused from the age rule does not mean excused from documentation. The assets are still documented on both paths. The settlement packet above is what makes the excusal usable.
The depletion path has 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 asset depletion is the only income source. These are program figures, subject to underwriting.
If an investment property is the goal, the depletion path is the consumer route. Leverage there is up to 65% on a purchase or rate-and-term refinance and 60% on a cash-out. On a principal residence or second home, the depletion path allows up to 80% on a purchase or rate-and-term refinance and 60% on a cash-out. Loan amounts run to $4,000,000 on the qualifier path and $125,000 to $3,500,000 on the depletion path. Cash-out proceeds never count as qualifying assets. Business-purpose rental financing for a pure rental purchase is DSCR, which qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Lendmire’s complete DSCR loans guide covers that route.
A Worked Example
Picture a retired business owner who receives a settlement, net of fees and liens, and deposits it into a savings account. Alongside it she holds brokerage securities and a retirement account. She wants to buy a second home.
On the depletion path, the securities count at 80% and the retirement balance at 70%. The settlement cash in savings counts at 100%, and the lender excuses it from the age rule when the packet supports it. The lender adds the usable balances and divides by 60 months. The result is her monthly qualifying income, and the debt-to-income test runs from there.
Follow the same logic with a deposit that lands the week before application. On the qualifier path, that deposit would face the 60-day question, so a borrower with time would let it age. On the depletion path, the packet does the work. These figures are illustrative, and the lender’s own calculation governs.
The order of events matters more than the arithmetic. Deposit first. Apply second. Keep the packet together.
Lump Sum vs. Structured Payments
A lump sum is an asset. Periodic payments are income.
The National Structured Settlement Trade Association explains that in a structured settlement the defendant funds a stream of periodic payments, usually backed by an annuity. Future payments are not cash in the account. On asset-based programs, they are not seasoned assets either.
Selling payment rights for a lump sum changes the picture. The same association notes that federal law and 46 states require court approval when a payee sells payment rights to a third party. The proceeds then arrive as a new large deposit. That deposit needs sourcing, and the court order becomes part of the paper trail.
Edge Cases That Trip Files
Pre-settlement advances. A lawsuit loan is a funding product, not settlement money. Lenders can treat it as borrowed funds. Confirm with the lender before counting it.
Funds still in trust. Money in the attorney’s trust account is not the borrower’s verified liquid asset until it is transferred. Wait for the transfer.
Entity accounts. Funds in a business account count only to the borrower’s ownership share on asset-based programs. Settlement money deposited into an LLC account may be treated differently from personal funds. Ask before you move it.
Restricted money. Funds that must be used for a specific purpose, such as medical care, are not free cash. Underwriters will want to know what restrictions apply.
Net versus gross. Attorney fees, liens and reimbursements come out before the borrower gets paid. Count the net.
Tax character. IRS Publication 4345 says settlements for personal physical injury or sickness are generally non-taxable, while punitive damages are taxable. A settlement can have several components, and a taxable piece may leave less usable cash. Tax treatment varies; consult a qualified professional.
Other asset classes. Cryptocurrency, precious metals and 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 by the lender.
Common Mistakes
- Moving the money between accounts. Every transfer adds a line the underwriter has to trace. Keep it in one account.
- Cashing out and redepositing. It breaks the trail between the disbursement statement and the deposit.
- Applying before the deposit shows on a statement. The lender can only count what the statements show.
- Mixing settlement money with a pre-settlement advance. The advance can read as borrowed money.
- Assuming the settlement makes the file easier. On the qualifier path, a fresh deposit still faces the 60-day question.
Key Terms Defined
Seasoned funds: money that has been in a borrower’s account long enough for a lender to treat it as the borrower’s own.
Sourced funds: money traced to a documented origin, such as a settlement agreement or a sale.
Large deposit: a non-payroll lump sum that a lender asks the borrower to explain, with thresholds set by each lender.
Structured settlement: a settlement paid as periodic payments, usually funded by an annuity, rather than as one lump sum.
Asset depletion: a method that divides usable assets by 60 months to create a monthly qualifying income.
Frequently Asked Questions
Can I use a settlement I have not been paid yet?
No. A pending case or an expected award is not an asset. Only funds that have reached your account and appear on a statement count. Wait for the disbursement and the deposit.
Does the settlement have to sit in my account for 60 days?
It depends on the path. On the asset qualifier path, the 60-day seasoning rule applies, and a sourced deposit may still be reviewed, subject to underwriting. On the asset depletion path, legal-settlement funds are excused from the statement-age rule. The packet still has to be complete.
Does my attorney’s trust account count as my assets?
Not until the money is transferred to your own account. Funds in trust are not verified liquid assets. After the transfer, the deposit has to match the disbursement statement.
Are structured settlement payments the same as cash reserves?
No. Periodic payments are an income stream, not cash in an account. A lump sum from selling payment rights is a new deposit that needs sourcing and the court order.
Does a settlement change my DSCR on a rental purchase?
No. The coverage ratio compares the property’s rent to its payment. The settlement only matters for the down payment and reserves. Some lenders in the network review sub-1.00 coverage, with leverage and terms adjusted.
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. All figures here are subject to underwriting, vary by program, and are not a commitment to lend.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving self-employed and high-net-worth borrowers in 16 states. Bank statement, P&L-only, 1099-only and asset-based mortgages are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Experian – Seasoned Funds for a Down Payment
2. NSSTA – Structured Settlements FAQ
3. IRS Publication 4345, Settlements – Taxability
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 an Assets-Only Mortgage Works · How Much Can You Borrow With an Assets-Only Mortgage? · How Asset Depletion Mortgage Eligible Assets Work for Rental Investors
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.