The Quick Read: A Texas royalty owner with large balances and lumpy documented income can qualify on assets instead of income, through select programs and subject to underwriting. The royalty checks matter mostly because of where they end up: seasoned cash and brokerage balances in a regulated account.
- 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 qualifying income.
- You are qualified on one path at a time, never a blend of the two.
- Royalty interests themselves are not published as eligible assets on either path. The cash they produce is.
- Programs change and every file is underwritten individually, so treat every figure below as a ceiling or floor, never an offer.
Why Royalty Income Makes Lenders Nervous
Royalty income is real money that is hard to document cleanly. It swings with production volume and commodity prices. A well declines over time. Your tax return may show a number far below what hit your bank account.
Three different numbers are in play: the gross check, the net check, and taxable income. The operator withholds Texas severance tax before you see a dollar. The Texas Comptroller lists the natural gas production tax as paid by the operator or producer, with exemptions for certain wells. Your royalty statement shows that as a deduction. Then depletion, a non-cash deduction, can shrink taxable income further on Schedule E.
That gap is why income-based underwriting frustrates royalty owners. A lender that reads your return sees the low number. A lender that wants steady history sees production decline and price swings.
What the Agency Rules Look Like
Agency programs do accept royalties, but with strings. The Fannie Mae Selling Guide asks for a royalty contract or statement, the latest tax return with Schedule E, a 12-month history, and documented continuance of at least three years.
Those are agency rules. They do not describe how an asset-based mortgage works. They do explain why royalty owners often look elsewhere: the continuance test is hard to prove on a depleting well.
The Idea: Skip the Income Fight
An asset-based mortgage sidesteps it. Instead of asking whether your royalties will last three years, the lender asks whether your balances can carry the loan. The asset-based mortgage programs Lendmire arranges through select lenders in its wholesale network work this way: no traditional personal-income documentation, pay stubs or employment verification. The assets are documented with statements, and every file is fully underwritten.
Lendmire is the broker. It arranges these loans through select lenders and does not lend or approve them. Consumer mortgage lending in this program runs in 16 states, and Texas is one of them. The figures do not change by state.
For a Texas royalty owner, this fits a common pattern. Years of checks have piled up in savings, a brokerage account, or CDs. Documented income looks thin or uneven. The balances are large. That is the profile these programs were built for. You can read more on the asset-based mortgage program page.
Path One: The Asset Qualifier
The asset qualifier path covers the entire loan amount with eligible assets. No employment or income is documented. The lender’s repayment-capacity review rests on the assets.
Here is how it typically looks through select programs, subject to underwriting:
- Leverage: up to 80% loan-to-value on a purchase and 75% on a refinance, on a principal residence or second home.
- Loan size: up to $4,000,000.
- Credit: a 600 minimum score.
- Reserves: none required at or below 75% loan-to-value. Above that, the lender sets them.
- Seasoning: 60 days, with two months of statements for each qualifying account.
Eligible assets count at a share of their balance. Brokerage accounts, CDs, money market and savings count at 100%. A 401(k) or IRA counts at 90% if you are under 59½ and 100% at 59½ or older. Accounts combine.
Run the illustrative math. Say the loan is $800,000. You hold $330,000 in brokerage accounts (100% counts, so $330,000), $300,000 in a 401(k) under 59½ (90%, so $270,000), and $200,000 in savings (100%, so $200,000). That is $800,000 of usable assets against an $800,000 loan, so it is reviewed on assets alone. The lender’s own calculation governs.
Notice what is not on that list: cash-out. Whether this path allows cash-out proceeds, and at what leverage, is set by the lender and is not published. Do not plan around it.
Path Two: Asset Depletion
Asset depletion turns your balances into a monthly income. Usable assets are divided by 60 months. That figure then has to carry the full housing payment and your other debts through the debt-to-income test.
The haircuts are steeper here than on the qualifier path:
| Asset on the depletion path | Share that counts |
|---|---|
| Cash accounts and CDs | 100% |
| Securities | 80% |
| Private stock | 75% |
| Retirement accounts (any age) | 70% |
| Real-estate equity | 60% |
Illustrative math: $1,500,000 in securities counts at 80%, or $1,200,000. Add $300,000 in cash at 100%. That is $1,500,000 usable, divided by 60 months, for $25,000 of monthly qualifying income. That income then has to carry the housing payment and other debts through the debt-to-income test.
Other terms, through select programs and subject to underwriting:
- Leverage on a principal residence or second home: up to 80% on a purchase or rate-and-term refinance, and 60% on a cash-out refinance.
- Leverage on an investment property: up to 65% on a purchase or rate-and-term refinance, and 60% on a cash-out. That loan is business-purpose.
- Loan size: $125,000 to $3,500,000.
- Minimum assets: the lesser of $1,000,000 or 1.25 times the loan, and never below $250,000 liquid when asset depletion is your only income source.
- Credit: follows the lender’s matrix. A first-time investor needs a 700.
- Statements: at least 120 days old at application, plus one within 45 days.
Asset-derived income can also supplement documented income up to a 45% debt-to-income ratio. When it does, the minimum-assets rule is waived. That helps a royalty owner who has some W-2 or business income plus a big portfolio.
Where Royalties Break the Rule
Here is the honest edge. The program does not publish royalty interests as eligible assets on either path. Mineral rights are illiquid, hard to value, and an appraisal of an oil and gas lease needs specialized production analysis, as legal commentary on oil and gas real estate lending points out. So do not count the value of the minerals as an asset.
The same goes for a few other holdings. Cryptocurrency, precious metals, collectibles, and pledged or borrowed funds 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.
Royalty advances are another trap. Some companies offer cash against future royalty checks. Those are not mortgages, and borrowed funds are not eligible assets.
Not everything on the depletion path is welcome either. Custodial accounts, deferred compensation, escrow accounts, foreign funds, cash on hand, stock options and non-vested restricted stock units are not eligible.
Getting the Royalty Cash Into Shape
The royalty checks help in one specific way: they build the balances. The work is making those balances look clean on a statement.
1. Move the money into a regulated account. Royalty deposits sitting across several operators’ checks do not help until they are in a bank or brokerage account with statements.
2. Let it season. Qualifier path: 60 days and two months of statements. Depletion path: statements 120 days old plus a recent one. Inheritance, sale-of-business and legal-settlement funds are excused from the depletion seasoning.
3. Keep the paper trail. Your 1099 can show gross or net royalty, so match it to your check stubs. Intuit’s tax-professional guidance notes royalties come through on 1099-MISC Box 2. A lender may ask where large deposits came from. Royalty statements answer that.
4. Do not move funds in a hurry. Big transfers late in the process invite questions you can avoid.
Tax treatment can depend on how the funds are used and how the property is held; borrowers should keep clear records and speak with a qualified tax professional before relying on any deduction.
Which Path Fits a Royalty Owner?
This is a genuine toss-up for some borrowers, so lead with the numbers you actually have.
- Cash and brokerage balances at least equal to the loan: the qualifier path is cleaner, with higher credit percentages (100% on most liquid assets) and no income to document.
- Large balances but a loan too big to cover outright: depletion may work, since it spreads usable assets over 60 months, provided the derived income carries the debt-to-income test.
- Mostly retirement money: the qualifier path counts a 401(k) or IRA at 90% under 59½ and 100% after. Depletion counts it at 70% at any age. That alone can decide it.
- Real-estate equity in other properties: only the depletion path counts it, at 60%.
- Business-owner with documented income through deposits: a bank statement program may fit better. That is a different program, for borrowers who document income with deposits.
Across a wholesale network, the leverage and seasoning rules rarely surprise a prepared borrower. The surprises come from account types: a custodial account, a stock option grant, or funds that moved recently.
Buying Rentals Instead?
If you are buying a rental, the answer changes. Rental financing for investors is DSCR, which qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Royalty income does not raise a property’s coverage ratio. The royalty checks help indirectly, as down payment and reserve money.
The depletion path does cover investment property, at the lower 65% and 60% leverage noted above. For most pure rental purchases, DSCR is the more natural fit. The asset-based path suits a royalty owner buying a home to live in or a second home. It also suits one who wants an investment purchase underwritten on assets rather than rent.
Key Terms Defined
Asset qualifier path: the route where eligible assets, after credit percentages, equal or exceed the whole loan, with no income documented.
Asset depletion path: the route where usable assets divided by 60 months become a qualifying monthly income.
Haircut: the percentage of an asset’s balance a lender refuses to count, for example 20% off securities.
Seasoning: how long funds must sit in an account before they count.
Severance tax: a Texas production tax the operator withholds and pays, which appears as a deduction on your royalty statement.
Depletion deduction: a non-cash tax deduction against royalty income that lowers taxable income without reducing your cash.
Royalty interest: a share of production revenue without the operating costs or duties of a working interest.
Frequently Asked Questions
Do royalty checks count as income for an asset-based mortgage?
No. Neither path underwrites royalty checks as income. The qualifier path documents no income, and the depletion path derives income from assets. The checks matter because they build the seasoned balances that do count.
Can I count the value of my mineral rights as an asset?
Not as published. Royalty interests are illiquid, and they are not listed among eligible asset classes on either path. If you sell the interest, the proceeds sitting in a regulated account can count once they are properly seasoned and documented.
Which is better for retirement accounts, the qualifier or depletion path?
The qualifier path counts a 401(k) or IRA at 90% under 59½ and 100% at 59½ or older. Depletion counts retirement accounts at 70% at any age. Eligibility, leverage and your goals decide the right fit, subject to underwriting.
Do I need to show traditional personal-income documentation?
No traditional personal-income documentation, pay stubs or employment verification are required on the qualifier path. Credit is reviewed too: a 600 minimum score applies on the qualifier path, and the depletion path follows the lender’s matrix.
Does Texas change the program figures?
No. The leverage, seasoning and asset percentages are the same everywhere the program is offered. Texas is among the 16 states where consumer mortgage lending is licensed.
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’s asset-based mortgage in Texas page presents the program for Texas borrowers.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging bank statement and other alternative-documentation mortgages — P&L-only, 1099-only and asset-based paths — through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Investors who want the broader program framework can review how DSCR loans work.
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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. Texas Comptroller, Natural Gas Production Tax
2. Fannie Mae Selling Guide B3-3.4-13
3. Legal500, oil and gas leasing from a real estate lending perspective
4. Intuit Tax Pro Center, oil and gas reporting
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Reserves vs Qualifying Assets on an Asset Qualifier Mortgage · How Much Does a Retiring Physician Need in Assets to Qualify for a Mortgage? · Can a Michigan Buyer Qualify for a Mortgage on IRA Assets Without Withdrawals?
Guides: Asset-Based Mortgage in Texas
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.