The Quick Read: An asset-based mortgage lets a third-party lender review your file against your balance sheet. A family loan lets your relatives set the terms themselves. The first suits a buyer whose assets can carry the file. The second suits a buyer whose family wants to lend and can paper it properly.
- Asset-based mortgage: a lender underwrites your statements, credit and the property, subject to underwriting.
- Family loan: a private contract. The terms are whatever you and your relatives sign.
- Assets and income are different tools: on the depletion path, assets become qualifying income. On the qualifier path, assets cover the whole loan.
- The planning trap: borrowed money, including a family loan, is not published as eligible assets on either path.
- Investment property: it fits only the depletion path, at lower leverage.
Here is the honest answer. If you hold large balances but no paycheck, and you want a regular third-party mortgage, the asset-based route is built for you. If a relative wants to be the bank, a family loan can work. It is not underwritten, though, and it can collide with any bank loan sitting beside it.
Neither option is better in general. They solve different problems. One answers “how do I qualify?” The other answers “who holds the lien?” Lendmire is a broker. Its wholesale network places asset-based files, and it sees family money show up on both sides of the deal.
Side-by-Side
The left column reflects the asset-based programs Lendmire’s network places, through select programs and subject to underwriting. The right column shows published industry norms for family loans, which vary by the contract.
| Factor | Asset-Based Mortgage | Family Loan (industry norms) |
|---|---|---|
| Review basis | Assets, or assets turned into income | Relatives’ willingness to lend |
| Documentation | Asset statements, credit, appraisal | Signed note, often a lien |
| Who sets terms | Lender guidelines | The family, by contract |
| Property types | Home or second home; investment on depletion path | Whatever the parties agree to |
| Entity vesting | Individuals; entities are lender-specific | Flexible by contract |
| Timeline | Third-party review, appraisal, title | Set by the family and their attorney |
| Reserves | None at or below 75% LTV (qualifier path) | None required by contract; a bank may ask |
| Assets used up | Counted toward qualifying | Not counted unless you deposit the funds |
How the Asset-Based Route Works
An asset-based mortgage comes in two paths, and a borrower is reviewed on one path at a time. Mixing them is a common mistake on these files.
On the asset qualifier path, your eligible assets must equal or exceed the entire loan. Lenders count brokerage accounts, certificates of deposit, money market and savings at 100%. A 401(k) or IRA counts at 90% under age 59½ and 100% at 59½ or older. No employment or income is documented. The credit floor is 600, and loans run up to $4,000,000. Leverage is up to 80% on a purchase and 75% on a refinance, on a principal residence or second home.
Here is the sanctioned arithmetic. Take an $800,000 loan. You hold $330,000 in brokerage accounts (100% counts), $300,000 in a 401(k) under 59½ (90% counts, or $270,000) and $200,000 in savings (100% counts). That is $800,000 of usable assets, so the file is reviewed on assets alone. The lender’s own calculation governs.
On the asset depletion path, usable assets are divided by 60 months to create monthly qualifying income. That income must then carry the housing payment and other debts through the debt-to-income test. Haircuts here are steeper. Cash and certificates of deposit count at 100%, securities at 80%, private stock at 75%, retirement accounts at 70% at any age, and real-estate equity at 60%.
Picture $1,500,000 in securities (80% counts, or $1,200,000) plus $300,000 in cash (100% counts). That is $1,500,000 usable. Divided by 60 months, it produces $25,000 of monthly qualifying income. That figure then runs through the debt-to-income test.
Depletion loans run from $125,000 to $3,500,000. The minimum is qualified assets of at least the lesser of $1,000,000 or 1.25 times the loan balance. It is never below $250,000 liquid when assets are your only income source. A first-time investor needs a 700 score. Other borrowers follow the lender’s matrix.
Both paths document the assets. Qualifier-path files want 60 days of seasoning and two months of statements per account. Depletion-path files want statements at least 120 days old plus one within 45 days. You skip income paperwork, not asset paperwork.
For which assets count in more depth, see Lendmire’s explainer Asset Depletion Mortgage Rules for Retirement vs Liquid Assets.
How a Family Loan Works
A family loan is a contract between people, not a program. Nobody reviews your credit or your balance sheet unless you ask. That freedom is the appeal. It is also the risk.
There are two very different uses. In the first, relatives lend you the down payment for a mortgage from a third-party lender. In the second, relatives are the lender. They hold the note and take a lien on the property.
The first use is the common one, and it is where files break. The asset-based programs we place treat pledged or borrowed funds as not published as eligible on either path. A short-term family loan wired in before closing and repaid after is a classic red flag at source-of-funds review. If the money is a loan, the lender needs to know. Whether it is allowed depends on the specific program.
The second use sidesteps third-party underwriting. For a rental purchase, that is usually fine. Rental financing is generally treated as business-purpose lending, and investor loans are reviewed differently from a standard owner-occupied mortgage. The CFPB’s official commentary on Regulation Z says the creditor must decide in each case whether a loan is primarily for a business purpose. Factors include the size of the transaction and how closely it relates to the borrower’s occupation. So do not assume every investment property is exempt.
Good family-loan paper includes a signed promissory note with the principal, payment schedule, maturity date and default consequences. It should include a recorded lien, such as a deed of trust. A handshake loan can be read as a gift. A relative who wants a stake in the deal belongs on title as a partner or co-borrower, not in a loan that is labeled something else.
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.
When the Asset-Based Mortgage Is the Better Fit
Choose the asset-based route when the lender relationship is the point and your balance sheet is strong. Several profiles match.
- You are living on a portfolio. Retirees, early-retired professionals and households whose income comes from investments often fit here. Your statements are large and your paycheck is not.
- You sold a business or received an inheritance or settlement. Depletion-path statements for those funds are excused from the 120-day age rule. Lump sums are exactly what these programs were built for.
- You want a residence or second home. The qualifier path caps leverage at 80% on a purchase and 75% on a refinance for those properties. Nothing is owed to relatives.
- You want a standard lender file. A third-party mortgage has a standard note, a lien, an appraisal and a title review. Nothing depends on a relative’s mood.
- You will own it alone, without family involvement. Third-party underwriting keeps the family out of the lien position.
There are real tradeoffs. Assets used to qualify cannot also be counted as reserves. Depletion-path leverage on an investment property is lower: up to 65% on a purchase or rate-and-term refinance and up to 60% on a cash-out. On the same path, a principal residence or second home can reach 80% on a purchase or rate-and-term refinance and 60% on a cash-out. Seasoning rules mean a recent windfall may need to sit first. Crypto, precious metals and collectibles are not published as eligible. The documented route is converting them to a seasoned cash balance in a regulated account, with the source reviewed.
The rules are not a loophole. The CFPB’s ability-to-repay rule lists current or reasonably expected income or assets among its eight minimum underwriting factors, per the Federal Register. Using assets to repay is a recognized basis. That is not the same as skipping verification, because the lender verifies those assets.
Consumer mortgage lending at Lendmire is licensed in 16 states, so program availability depends on where the property sits.
When a Family Loan Is the Better Fit
A family loan wins when flexibility matters more than structure, or when no lender program fits.
- Your assets are not eligible assets. Illiquid holdings, crypto or business interests may not count on either path. A relative can lend against the property anyway.
- The property type is unusual. Family terms bend to the deal. Programs do not.
- The family wants to lend. Some parents want a return and a secured position. A recorded lien gives that.
- You need a bridge to a permanent loan. Relatives can hold the deal briefly. Plan the exit before you sign.
- You prefer less lender involvement. There is no third-party credit review. That is attractive when speed of paperwork and privacy matter more than formal protections.
The costs are less visible. You lose the formal protections a lender file provides. Missed payments strain relationships. A relative who needs money back early can create a crisis. Death or divorce can complicate who holds the note. Forgiving principal later is itself a gift with its own consequences, which is one more reason to involve an attorney and a tax professional.
Stacking is where borrowers get hurt. Suppose a relative records a lien behind your bank’s first mortgage. That is secondary financing, which many programs restrict or require disclosed. Undisclosed seconds create fraud risk. Likewise, a family loan dressed up on a gift letter is a misrepresentation. A true gift is a transfer with no repayment expected, and the donor letter says so.
Many investors in this spot ask whether a rental-focused loan avoids the whole question. 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 assets then matter as down payment and reserves rather than income. Programs below 1.00 coverage are available through select lenders in the network, with LTV and terms adjusted. The complete DSCR loans guide walks through that path.
Frequently Asked Questions
Can I use a family loan as my down payment on an asset-based mortgage?
Usually not as a clean fix. Borrowed funds are not published as eligible assets on either path. The source-of-funds review reacts to money that must be repaid. A true gift is a different category, and it requires a donor letter stating no repayment is expected.
Does an asset-based mortgage cover investment property?
Only on the depletion path. Leverage there is up to 65% on a purchase or rate-and-term refinance and 60% on a cash-out refinance. The qualifier path is for a principal residence or second home. Terms are subject to underwriting and the lender’s matrix.
Which assets count the most?
On the qualifier path, brokerage, certificates of deposit, money market and savings count at 100%. A 401(k) or IRA counts at 90% under 59½ and 100% after. On the depletion path, securities count at 80% and retirement accounts at 70% at any age. Real-estate equity counts at 60%.
Is a family loan secured?
It should be. A signed note with a recorded lien gives the lender a defined remedy and keeps the loan from reading as a gift. Without a lien, the family lender is unsecured. An attorney should draft it.
Can I combine both?
Sometimes, but the order matters. A family loan behind a third-party first mortgage is secondary financing, and many programs restrict it. A family loan as the only financing avoids that conflict, but then no lender underwrites you. Tell your broker early so the structure fits the program.
The Verdict
Pick the asset-based mortgage if you want a standard third-party loan and your statements carry it. Pick the family loan if your relatives want to lend, the property or assets do not fit a program, and everyone will honor a signed, secured note. Pick neither blindly if you plan to stack them. That combination can fail at source-of-funds review.
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.
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.
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References
1. CFPB: Regulation Z §1026.3, Exempt Transactions
2. Federal Register: Ability-to-Repay and Qualified Mortgage Standards Under the Truth in Lending Act
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 Asset Depletion Mortgage Eligible Assets Work on a Jumbo Loan · Can a Founder Get a Super Jumbo Loan on Assets and No Income? · How to Document an Asset Depletion Loan When Assets Are Liquid Holdings
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.