The Quick Read: Usually, asset depletion wins when a retiree holds a large portfolio but little paycheck-style income, and the lender can either count the balances against the whole loan or turn them into monthly qualifying income. Conventional wins when your documented income already carries the payment. The two paths below work differently, and you are qualified on one at a time.
- Asset qualifier path: your eligible assets must equal or exceed the entire loan, and no employment or income is documented.
- Asset depletion path: usable assets are divided by 60 months to create qualifying income, which then runs through the debt-to-income test.
- Conventional wins when Social Security, a pension, and steady retirement distributions already clear the income test with room to spare.
- A pure rental purchase usually belongs in a different loan type: a DSCR loan, which looks at the property’s rent instead of your personal income.
- Program figures do not change by state. A Tennessee borrower sees the same ranges as anyone else, subject to underwriting.
Key Terms Defined
Asset depletion is a method that converts a pile of liquid assets into an imaginary monthly income, so the lender can test your debt load without a paycheck.
Asset qualifier is a different method. The lender counts your eligible assets against the full loan amount and does not document income at all.
Haircut is the percentage of an account’s balance that a lender refuses to count, because the money is harder to reach or could drop in value.
Debt-to-income (DTI) compares your monthly debts, including the new housing payment, to your monthly income.
Seasoning is how long money has to sit in your accounts before the lender treats it as yours.
DSCR is a ratio that tests whether a rental’s income covers its own monthly payment. It ignores your personal income.
Non-QM means a mortgage that falls outside the standard agency box and is reviewed under a lender’s own program rules.
What Does “Conventional” Actually Mean Here?
Conventional, here, means a standard agency-style mortgage that is reviewed around documented income. It is the loan most people picture when they say “mortgage.” For a retiree, documented income usually means Social Security, a pension, annuity payments, and any retirement-account distributions you can prove.
That is where retirees get stuck. A household can hold a very large portfolio and still show modest income on paper. The portfolio is real, but a pay-stub-minded formula can’t see it.
Agency programs do have a way to use assets. Agency rules count only 70% of stock, bond, and mutual fund accounts when testing how long distributions can continue. If you already draw from an account, those distributions generally must be able to continue for at least three years. That is a narrow tool with its own conditions.
Asset-based mortgages are built for a different question. They ask whether your balance sheet can carry the loan. Across the wholesale network Lendmire places files with, that question gets two answers, and the next section lays them out.
How the Two Asset Paths Work
The short answer: the qualifier path asks whether your eligible assets cover the entire loan. The depletion path asks whether your assets, converted to monthly income, can carry the housing payment and your other debts. Both are placed through select programs and remain subject to underwriting.
The asset qualifier path
On this path, the lender adds up your eligible assets after applying credit percentages. If the total equals or exceeds the whole loan amount, you qualify on assets alone. No employment or income is documented.
Here is the shape of a typical file, with illustrative numbers. Take an $800,000 loan. Say you hold $330,000 in brokerage accounts, which count at 100%, or $330,000. You hold $300,000 in a 401(k) while under 59½, which counts at 90%, or $270,000. You hold $200,000 in savings, which counts at 100%, or $200,000. That adds up to $800,000 of usable assets, so the file is reviewed on assets alone. The lender’s own calculation governs.
Leverage on this path runs up to 80% loan-to-value on a purchase and 75% on a refinance, for a principal residence or second home, through select programs. Loans run up to $4,000,000. Whether cash-out proceeds are allowed is set by the lender and is not published, so do not plan around it.
Reserves are not required at or below 75% loan-to-value. Above that, the lender sets them. Credit is reviewed against a 600 minimum score.
The asset depletion path
This path works like a paycheck simulator. The lender takes your usable assets, divides by 60 months, and treats the result as monthly income. That income must carry the full housing payment and your other debts through the debt-to-income test.
Take $1,500,000 in securities, which count at 80%, or $1,200,000. Add $300,000 in cash at 100%. That is $1,500,000 usable, divided by 60 months, or $25,000 of monthly qualifying income. That figure then carries the housing payment and your other debts. Again, the numbers are illustrative.
Leverage on this path differs by occupancy and purpose:
- 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.
- Investment property: up to 65% on a purchase or rate-and-term refinance, and up to 60% on a cash-out refinance.
- Cash-out proceeds never count as qualifying assets.
Loans run from $125,000 to $3,500,000. The lender’s score-and-loan-amount matrix sets the credit requirement. A first-time investor on this path needs a 700 score. You also need qualified assets of at least the lesser of $1,000,000 or 1.25 times the loan balance, and never less than $250,000 liquid when asset depletion is your only income source.
If you also have documented income, the assets can supplement it, up to a 45% debt-to-income ratio. In that case, the minimum-assets rule is waived.
Which Assets Count, and How Much?
The short answer: cash and CDs count in full on both paths. Securities, retirement accounts, and real-estate equity are where the two paths split, so never mix the columns. Percentages are the share of your balance that counts, subject to underwriting.
| Asset | Qualifier path | Depletion path |
|---|---|---|
| Brokerage / securities | 100% | 80% |
| CDs | 100% | 100% |
| Savings, money market, cash accounts | 100% | 100% |
| Retirement under 59½ | 90% | 70% |
| Retirement at 59½ or older | 100% | 70% |
| Private stock | Not published | 75% |
| Real-estate equity | Not published | 60% |
Some assets do not count 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.
Crypto, precious metals, collectibles, pledged or borrowed funds, and business accounts beyond your ownership share are not published as eligible on either path. The documented route is to convert them into a seasoned cash balance in a regulated account, with the lender reviewing the source. Do not assume they count at any percentage.
Retirement Accounts and the 59½ Line
Age 59½ matters because lenders mirror the penalty rules around early withdrawals. On the qualifier path, a 401(k) or IRA counts at 90% before 59½ and 100% at 59½ or older. On the depletion path, retirement accounts count at 70% at any age.
Counting an account is not the same as spending it. You do not have to sell or draw from the account for the lender to count it. The calculation only shows the lender that the money could carry the loan if needed.
Withdrawing is a different story. Under IRS Topic 557, distributions from a traditional or Roth IRA before 59½ generally carry a 10% additional tax unless an exception applies, so tax treatment varies and you should consult a qualified professional before moving any retirement money.
One more caution: do not pledge a retirement account as collateral. Keep it a counted balance, not a pledged one.
When Asset Depletion Beats Conventional
Asset depletion wins in a handful of recognizable situations. In each one, the borrower’s balance sheet is strong and the income documents are thin.
Your documented income is small compared with your portfolio. Picture a retiree who sold a business and holds the proceeds in brokerage accounts and CDs. Social Security is modest. A conventional file would convert almost none of that wealth into income. Depletion turns it into a monthly figure the debt-to-income test can use.
You want the loan covered by assets outright. If your eligible assets equal or exceed the whole loan, the qualifier path skips the income question entirely. This is the cleanest fit for a cash-heavy household buying a primary residence or second home.
Your income is lumpy or still arriving. Think of an inheritance, a legal settlement, or the sale of a business. On the depletion path those funds are excused from the usual seasoning rule. The lender still documents the assets.
You want to keep the portfolio invested. Selling holdings to make a bigger down payment gives up market exposure. Qualifying on the balances lets the money keep working, though a lender will still look at what remains after closing costs and the down payment.
The home is an investment property you will hold personally. Of the two asset paths, only depletion reaches investment property, at the lower 65% and 60% leverage ceilings above. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
When Conventional Still Wins
Conventional wins more often than the asset-based pitch implies. Say your Social Security, pension, and steady retirement distributions already carry the payment with room to spare. In that case, you do not need to convert anything.
It also wins when you would hit the depletion path’s minimums awkwardly. Remember the floor: qualified assets of at least the lesser of $1,000,000 or 1.25 times the loan, and never below $250,000 liquid when assets are your only income. A retiree with a modest portfolio and a modest loan may fall short of that, while a documented-income file does not care.
Haircuts also matter. On the depletion path, a retirement account counts at 70% and securities at 80%. If most of your wealth sits in an IRA, the usable number shrinks, and a conventional file built on documented distributions may make more sense.
And if your documents are clean and your income is steady, the simpler file is usually the better one. This is a genuine toss-up in the middle. A retiree with solid pension income and a large portfolio can reasonably pick either, so run both before choosing.
Decision Table: Which Path Fits Which Retiree?
| Your situation | Likely better path |
|---|---|
| Documented income clears the payment | Conventional |
| Large portfolio, little documented income | Asset depletion |
| Eligible assets cover the whole loan | Asset qualifier |
| Money from a sale or settlement, income thin | Asset depletion |
| Buying a rental that earns its keep | DSCR |
| Own the property personally, rent too low for DSCR | Asset depletion |
Can a Retiree Without a Paycheck Get a Mortgage at All?
Yes. Retirees sometimes assume no paycheck means no mortgage. The federal ability-to-repay rule says otherwise. The CFPB’s General QM final rule says creditors must verify a consumer’s income or assets, not only employment income. The same rule dropped the old 43% debt-to-income cap, though individual lenders and programs still set their own limits.
Lighter income paperwork is not the same as no paperwork. Your assets are documented on both paths. Credit, appraisal, and statements still apply. The loan is a consumer mortgage, so standard consumer disclosures apply as well.
Buying a Rental? Look at DSCR First
A retiree buying a pure rental often does not need to qualify on personal income at all. DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed 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. Your portfolio still matters, but as reserves and proof of where your down payment came from, not as income.
That said, DSCR is not purely about the property. Credit, reserves, and leverage all play a part. Programs below a 1.00 coverage ratio are available through select lenders in the network, but leverage and terms adjust.
So the choice usually comes down to ownership. Say the rent is strong and you want a business loan on the property. Run the DSCR route. Say the rent is too thin to cover the payment, or you want to hold the property personally and qualify on your own balance sheet. Then asset depletion on an investment property, at 65% on a purchase, is the alternative to test. Lendmire’s complete DSCR loans guide walks through how DSCR files are built.
What About Tennessee Specifically?
Nothing in the program ranges changes because the property or the borrower is in Tennessee. The leverage ceilings, haircuts, seasoning, and loan amounts above apply the same way. Lendmire arranges consumer mortgages in Tennessee, one of 16 states where its consumer lending is licensed, through select lenders in its network.
What does vary locally is context: home prices, insurance, and property taxes differ by county and neighborhood. Those affect your payment and your reserves. They are not program parameters, and none of them changes whether the asset math works.
A Tennessee retiree relocating from elsewhere should expect the same documentation either way. Statements from the accounts you are counting are required regardless of where they are held, with the seasoning rules below.
A Retiree’s Document and Seasoning Checklist
Bring these to the first conversation. They save back-and-forth later, subject to underwriting.
- Qualifier path seasoning: 60 days, with two months of statements for each qualifying account.
- Depletion path statements: 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: a 600 minimum on the qualifier path, and the lender’s matrix on the depletion path.
- Housing history: 0x30x12, with one 30-day late in the last twelve months considered case by case. A housing event needs 4 years of seasoning on the depletion path, and multiple bankruptcies are not eligible.
- Account ownership: accounts you own, with sources you can explain. Move non-eligible assets into a regulated cash account well ahead of applying.
Frequently Asked Questions
Do I have to sell my investments to use asset depletion?
No. The lender counts the balances and does not require you to sell or draw them down. Keep in mind that the lender will still look at what you hold after the down payment and closing costs, so you need to plan for those.
Can I use my IRA or 401(k)?
Yes, through select programs. On the qualifier path a retirement account counts at 90% under 59½ and 100% at 59½ or older. On the depletion path it counts at 70% at any age. Counting a balance is not the same as withdrawing it.
Can I use both paths on the same loan?
No. A borrower is qualified on one path at a time. The qualifier path covers the loan with assets alone. The depletion path converts assets to income and runs the debt-to-income test. Your broker will show you which one fits your file.
Does asset depletion work for an investment property?
Only on the depletion path, at up to 65% on a purchase or rate-and-term refinance and 60% on a cash-out, subject to underwriting. If the rent supports the payment, a DSCR loan may be the better tool for a pure rental.
Do I still need documents if I do not document income?
Yes. Your assets are documented on both paths, and credit, appraisal, and statement seasoning still apply. Lighter income paperwork never means no paperwork.
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. Reach the team at 828-256-2183 or through the quote request page.
For a retiree with a big portfolio and a small paycheck, the real decision is rarely asset depletion versus conventional. It is which way of showing the same wealth costs you the least flexibility.
For current guidelines and terms, see Lendmire’s asset-based mortgage programs page.
Lendmire’s asset-based mortgage in Tennessee page presents the program for Tennessee borrowers.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. IRS Topic 557, Tax on Early Distributions
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Is an Asset Qualifier Mortgage Harder to Get Than an Asset Depletion Loan? · Does a Retiree Using Asset Depletion Need a Super Jumbo Loan? · How to Meet Jumbo Loan Asset Depletion Requirements for an Asset-Rich Retiree
Guides: Asset-Based Mortgage in Tennessee
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.