How Asset Depletion Mortgage Eligible Assets Work for Rental Investors

The Quick Read: Asset depletion converts your verified liquid assets into a hypothetical monthly income figure, so your accounts stay untouched while the lender counts them toward qualifying, and for rental investors that mostly helps on a primary or second home, while a pure rental purchase usually runs on bank statements or DSCR instead.

• Cash, brokerage holdings and (at a discount) retirement accounts are the usual building blocks.
• Real estate equity, business accounts and borrowed funds generally do not count.
• Your down payment, closing costs and reserves come out of the pool before any income is calculated.
• On the asset path, leverage runs up to about 80% LTV on a primary residence, subject to lender guidelines.
• Rental purchases typically move to a different documentation path.

What Asset Depletion Actually Does

Asset depletion is a way to prove income without a paycheck. A lender takes the eligible assets you hold, adjusts their value, and spreads the result over a set number of months. The output is a monthly figure the lender treats as qualifying income.

You sell nothing. The money stays in your accounts. Nobody places a lien on the brokerage account, and the loan is still secured by the property.

It fits a specific borrower. Think of a retiree with a large portfolio and little taxable income. Or an investor whose depreciation write-offs shrink the income on the tax return. Or someone who just sold a business and has cash, but no recent income to show.

This is a non-QM method. Non-QM means the loan sits outside the standard agency box, so each lender sets its own rules. Across Lendmire’s wholesale network, no two programs treat assets quite the same way. The loan is reviewed on documented income under the applicable program, subject to lender guidelines. That wording matters, because the asset method is still underwriting. It is just different math.

How the Calculation Runs, Step by Step

The order of operations is the whole game. Here is the sequence most programs follow.

1. Inventory the accounts. The lender lists every liquid, verifiable account you hold in your own name.

2. Apply a haircut by asset type. A haircut is a percentage cut to an account’s value. Stable cash takes little or none. Volatile or restricted money takes more.

3. Subtract committed funds. Your down payment, closing costs and reserves come out first. Those dollars cannot also be income.

4. Divide by a depletion period. This divisor is the number of months the lender spreads the remainder across. Shorter periods produce more monthly income. Longer periods produce less.

5. Use the result. On an income-conversion program, the figure joins your other income in a debt-to-income test. On an assets-only program, a liquidity test replaces that ratio.

A large pool can shrink fast. After haircuts and committed funds, the leftover number may look modest. Then the divisor cuts it again. Run this math before you assume a portfolio qualifies.

Which Assets Count?

Cash and securities count most readily; retirement money counts at a discount; everything else is case by case. Lenders want accounts that are liquid, titled to you, and documented. The table shows how most programs we place files with treat each type, in general terms.

Retirement accounts are the swing factor. Most programs cut them more than taxable accounts, and the cut tends to ease once you pass age 59½. Lendmire’s piece Asset Depletion Mortgage Rules for Retirement vs Liquid Assets goes deeper on that split.

What Usually Doesn’t Count

Most programs exclude real estate equity. That surprises rental investors, since equity is often their largest asset. Lenders treat it as illiquid, because you cannot spend it without selling or borrowing against it.

These are also commonly excluded or tightly limited:

• Business accounts, which many programs treat as ineligible or send to extra review.
• Borrowed funds and gift funds.
• Foreign accounts.
• Restricted or unvested holdings.
• Accounts you can only partly access, such as margin accounts, where only the withdrawable amount may count.

Sale proceeds are a gray area. If you just sold a rental, the cash may count once it is documented and sitting in your account. 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.

Where the Method Comes From

The practice is older than the non-QM market. The Office of the Comptroller of the Currency, a federal bank regulator, describes it in OCC Bulletin 2019-36. The bulletin calls asset depletion underwriting a way to calculate a hypothetical cash annuity stream from an applicant’s assets. That stream is added to other income when judging ability to pay. It notes the approach is often used for high-net-worth applicants with big liquid holdings but little cash flow.

Notice the word hypothetical. It confirms you are not liquidating anything. The bulletin also expects lenders to confirm ownership, value and how long the assets have existed, which is why statements and seasoning matter. It leaves the actual haircuts and divisors to each lender’s policy. That is exactly why programs differ so much.

Can You Use It to Buy a Rental?

Not directly, in most cases. This is where the general rule breaks. Across our wholesale network, the asset-based path covers primary residences and second homes. Leverage on that path runs up to about 80% LTV on a primary residence, subject to lender guidelines.

A rental purchase typically moves to another documentation path. Three are common:

• Bank statements. Twelve months of statements, with income taken from deposit averages. Investment-purchase leverage here varies by lender.
• A profit-and-loss method. Useful if you run a business and your books tell a better story than your tax return.
• DSCR. DSCR stands for debt service coverage ratio. It divides the property’s monthly rent by its full monthly obligation. Our complete DSCR loans guide explains the mechanics.

Occupancy also decides the paperwork. An owner-occupied file is a consumer mortgage, and TRID disclosure rules apply. A non-owner-occupied rental, including a short-term rental, is a business-purpose loan and is exempt from TRID. The CFPB’s Regulation Z § 1026.3 sets that business-purpose exemption. It also says a lender must look at the loan’s primary purpose, and that owner-occupied properties have unit-count thresholds. Calling something an investment property does not settle it automatically.

Does the asset pool still matter on a rental file? Yes. Reserves are commonly around 6 months of the housing payment on alt-doc files. Your liquid assets are what prove them, even when they do not drive the income.

One Pool, Three Jobs

The same dollar cannot be your down payment, your reserves and your qualifying income. This double-count problem sinks more first attempts than any haircut.

Picture an investor with cash, a brokerage account and a retirement account. She wants a second home. The lender pulls the down payment and closing costs from cash first. Next it sets aside reserves. Only what remains, after haircuts, goes through the divisor.

Then she tries a different order. She funds the purchase from the brokerage account instead, because spending it preserves the retirement money, which counts toward the income calculation even with the biggest haircut. Which accounts you count, and which you spend, is a real decision. Ask a broker to run both versions before you commit funds.

Which Tool Fits Your File?

The right path depends on what you are buying and what your paperwork shows.

A good rule of thumb: if the property rents well, start with DSCR. If your income is the story, look at bank statements. If your assets are the story and you are buying a home you will live in, look at asset depletion. Some investors use more than one across a portfolio.

Key Terms Defined

Haircut: a percentage cut a lender applies to an account’s value to reflect risk or access limits.

Divisor: the number of months a lender spreads your eligible assets across to produce monthly income.

Seasoning: how long funds have sat in your account, which helps show they are really yours.

Reserves: liquid money you keep after closing, commonly around 6 months of the housing payment on these files.

DSCR: the property’s rent divided by its full monthly obligation, used for rental purchases.

Non-QM: a loan outside the standard agency box, where each lender sets its own rules.

Common Mistakes and Decline Reasons

• Counting retirement money at full value. Most programs cut it, and the size depends on your age.
• Forgetting reserves. The pool shrinks before income is calculated.
• Moving money at the last minute. Large recent deposits can need documentation or seasoning.
• Counting business or borrowed funds. Many programs exclude them.
• Assuming equity counts. It almost never does.
• Assuming one lender’s rules apply to all. Loan sizes on these programs run roughly from $125,000 to $3,500,000, and each lender’s sheet differs.

Before you apply, gather twelve months of statements for every account, a list of how each is titled, and a note on any recent large deposits.

Next Step

If your wealth sits in accounts rather than a tax return, Lendmire can help you compare asset depletion, bank statement and DSCR options based on your assets, the property, credit profile, leverage and your goals. Consumer mortgage programs on this lane are available in 16 states, and qualification is subject to lender guidelines. This is not a commitment to lend. Reach the team at 828-256-2183 or request a quote.

For current guidelines and terms, see Lendmire’s self-employed mortgage programs page.

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.

References

1. OCC Bulletin 2019-36

2. CFPB Regulation Z § 1026.3