The Quick Read: The best program for a loss on your return is one that never reads the return: an asset-based mortgage, where your documented balances either cover the whole loan or convert into qualifying income. Which path fits depends on your assets, your property, and how much cash you want out.
- The asset qualifier path covers the entire loan with eligible assets and documents no employment or income.
- The asset depletion path divides usable assets by 60 months to create income, which then runs through the debt-to-income test.
- Neither path asks for tax returns, pay stubs or employment verification, so a Schedule C, Schedule E or K-1 loss is not an input.
- Cash-out is more restricted than a purchase or rate-and-term refinance, so the best program for your situation may mean taking less cash.
- Every file is fully underwritten, and the assets are documented with statements. Terms are subject to underwriting.
Key Terms Defined
Cash-out refinance: a new mortgage larger than your current payoff, with the difference paid to you.
Asset qualifier path: a way to qualify where eligible assets, after credit percentages, equal or exceed the entire loan amount.
Asset depletion path: a way to qualify where usable assets divided by 60 months become monthly income.
Debt-to-income ratio (DTI): your monthly debts, including the new housing payment, divided by your monthly income.
Paper loss: a loss on the return created by depreciation, write-offs or timing, not by cash leaving your accounts.
Haircut: the share of an asset’s balance a program will not count. A 70% credit means a 30% haircut.
What a Loss on Your Return Does and Doesn’t Do
A loss on your return only hurts where the return is the test. Conventional full-documentation underwriting reads your tax return, averages your income, and subtracts losses. A negative number there can sink the file.
An asset-based file works differently. On the qualifier path, no income is documented at all. The lender reviews the file on the strength of your assets. On the depletion path, the income comes from your balances, so the return does not set it.
Underwriters see two kinds of losses. A paper loss comes from depreciation, cost segregation or heavy write-offs. Your accounts can be full while the return shows red. A cash loss means the business or property actually burned money, and your balances shrink. Asset programs look at the balances, so the cash loss shows up there, in the statements, not on the return.
One caveat matters. On the depletion path, derived income can supplement documented income, up to a 45% debt-to-income ratio. If you choose that route, the documented income gets read, and a loss on it counts. Skipping the supplement keeps the return out of the test.
Quick note on the word “return”: this article means the tax return, not the tax treatment of cash-out proceeds. Tax treatment varies; consult a qualified professional.
The Two Asset Paths, Step by Step
Lendmire is a mortgage broker, so it places these files with select lenders in its wholesale network. Those lenders’ asset-based mortgage programs share one structure. You qualify on one path at a time, never a blend.
Asset qualifier path
1. Pick the loan amount. Loans run up to $4,000,000, subject to underwriting. 2. Total your eligible assets after the credit percentages. The total must equal or exceed the entire loan. 3. Season the funds. Expect 60 days of seasoning and two months of statements for each qualifying account. 4. Clear credit. The published floor is a 600 score. 5. Check leverage. It runs up to 80% on a purchase and 75% on a refinance, on a principal residence or second home.
Reserves are not required at or below 75% loan-to-value. Above that, the lender sets them.
Asset depletion path
1. Total your usable assets after the haircuts. 2. Divide by 60 months. That figure is your monthly qualifying income. 3. Run it through debt-to-income against the full housing payment and your other debts. 4. Meet the minimums. You need qualified assets of at least the lesser of $1,000,000 or 1.25 times the loan balance. When depletion is your only income source, you also need at least $250,000 liquid. 5. Document statements at least 120 days old, plus the most recent one within 45 days.
Loans run from $125,000 to $3,500,000. Credit follows the lender’s matrix, and a first-time investor needs a 700 score.
What Counts, and How Much
On the qualifier path, brokerage accounts, certificates of deposit, money market and savings count at 100%. Retirement accounts count at 90% if you are under 59½ and 100% at 59½ or older. Accounts combine.
On the depletion path, cash and certificates of deposit count at 100%, and securities at 80%. Retirement accounts count at 70% at any age, and real-estate equity at 60%. Custodial accounts, deferred compensation, escrow accounts, foreign funds, cash on hand, stock options and non-vested restricted stock units are not eligible there.
Privately held company stock is not an eligible asset on either path. Cryptocurrency, precious metals and collectibles are not published as eligible on either path. Neither are pledged or borrowed funds. The documented route is to convert them to a seasoned cash balance in a regulated account, with the source reviewed by the lender.
Where Cash-Out Fits on Each Path
On the depletion path, cash-out is capped at 60% loan-to-value. That applies to a principal residence, a second home and an investment property alike. A rate-and-term refinance gets more room: up to 80% on a principal residence or second home, and 65% on an investment property.
On the qualifier path, the lender sets cash-out eligibility and leverage, and it is not published. Ask for the lender’s answer on your specific file before planning around it.
On both paths, cash-out proceeds never count toward your qualifying assets. You cannot borrow cash and then use it to qualify for the same loan.
How the Paths Compare to Other Ways to Qualify
The table shows what each route tests and how a loss on your return plays. Rules for programs other than the asset-based paths belong to those programs and differ from one to the next.
| Route | What gets tested | Loss on your return | Cash-out |
|---|---|---|---|
| Asset qualifier | Assets vs. whole loan | Not an input | Lender sets it |
| Asset depletion | Assets ÷ 60 months, then DTI | Not an input | Up to 60% LTV |
| Bank statement | Deposits as income | Return is not the test | Set by that program |
| DSCR (rentals) | Rent vs. property payment | Not an input | Set by that program |
| Conventional full-doc | Tax-return income and DTI | Counts against you | Per agency rules |
The bank statement program fits borrowers who document income with deposits. Business-purpose rental financing is DSCR, which qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. If your cash-out is tied to a vacation or short-term rental, see Lendmire’s piece Best Short-Term Rental Cash-Out Refinance Program With a Loss on Your Return.
Where the Rules Break
Investment property. The depletion path covers investment property, but the qualifier path as described here covers a principal residence or second home. On the depletion path, investment property leverage is lower than on an owner-occupied home: 65% on a purchase or rate-and-term refinance, and 60% on a cash-out.
Investment property loans on this path are business-purpose investor loans, so they are reviewed differently from a standard owner-occupied mortgage. Federal regulation treats credit for a non-owner-occupied rental as business purpose. The Federal Register rulemaking says investment-purpose loans are considered business-purpose. If you live in the property, the treatment changes, and Doss Law describes occupancy over 14 days as the commonly cited trigger.
Privately held company stock. It is not an eligible asset on either path. A founder’s route is documented liquid assets. That means seasoned proceeds from a sale or buyout, cash, public securities and retirement accounts at their haircuts. On the depletion path, sale-of-business, inheritance and legal-settlement funds are excused from the 120-day statement seasoning.
Credit events. Housing history is 0x30x12, and one 30-day late in the last twelve months is considered case by case. Multiple bankruptcies are not eligible. A housing event needs 4 years of seasoning on the depletion path.
A weak property. If the property itself is the problem, a loan on it may hit leverage limits. The loss on your return is never the cause.
A Worked Example
Run the numbers on a consultant who owns a home outright, with a Schedule C that shows a loss after heavy write-offs. Her balances are $1,500,000 in securities and $300,000 in cash. These figures are illustrative, and the lender’s own calculation governs.
On the depletion path, the securities count at 80%, which is $1,200,000. The cash counts at 100%, which is $300,000. Usable assets total $1,500,000. Divided by 60 months, that is $25,000 of monthly qualifying income.
That income then carries the new housing payment and her other debts through the debt-to-income test. Her tax return never enters the math. Her usable assets also clear the minimum rule, which needs at least the lesser of $1,000,000 or 1.25 times the loan, so a modest loan fits.
Leverage is the limit. A cash-out on her primary residence tops out at 60% of appraised value on this path. If she wants more cash, she should compare a rate-and-term refinance at up to 80%, with a smaller cash amount.
Now run a second case. A retiree has $330,000 in brokerage accounts, $300,000 in a 401(k) and $200,000 in savings. He is under 59½, and he wants an $800,000 loan on the qualifier path. The brokerage counts at 100%, which is $330,000. The 401(k) counts at 90%, which is $270,000. The savings count at 100%, which is $200,000. Usable assets total $800,000, which equals the loan, so he is reviewed on assets alone, subject to underwriting.
Is Cash-Out the Right Move?
Cash-out raises your balance and your monthly payment. Ask what the money earns against what it costs. A rate-and-term refinance gets higher leverage on the depletion path, but it pays you little or nothing. A HELOC is a separate product with its own rules.
A broker can compare these options across several wholesale lenders. The best program for your situation depends on your property type, credit profile, leverage need and documentation. Statements and credit decide it, not the headline of the loan.
Who This Does Not Fit
This route is a poor fit for a few borrowers:
- Your wealth is mostly illiquid, such as private company shares, unvested restricted stock units or stock options.
- Your credit sits below the 600 floor on the qualifier path or the lender’s matrix on the depletion path.
- You are a first-time investor with a score under 700 on the depletion path.
- Your balances sit in crypto, metals or foreign funds you cannot convert to a seasoned cash balance.
- You need leverage above the ceilings. They are ceilings, never offers.
If your assets are thin but the property cash-flows, a rental-based program may fit better.
What to Bring
Gather these before you talk to a broker:
- Two months of statements for each account, newer than 45 days.
- Older statements showing the 60-day or 120-day seasoning, depending on your path.
- A current mortgage statement and homeowners insurance.
- A short note on why your return shows a loss.
- Entity documents if the property is held in an LLC, subject to lender program eligibility.
- Photo ID and authorization for a credit pull.
You skip traditional personal-income documentation, pay stubs and employment verification. The assets are fully documented. The program is available through Lendmire’s consumer mortgage lending in 16 states: Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia and Washington.
Next Step
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. This is not a commitment to lend.
Frequently Asked Questions
Can I qualify with a loss on my return?
Yes, because an asset-based file does not read the return. The qualifier path documents no income, and the depletion path builds income from your balances. A supplement to documented income is the exception, since that income gets read. Approval depends on assets, credit and the property.
Do cash-out proceeds count as assets?
No. Borrowed or pledged funds are not published as eligible on either path, and the same logic applies to cash you pull out of the property. Your assets must stand on their own before closing.
Can I count shares of my privately held company?
No. The route is documented liquid assets: seasoned proceeds from a sale or buyout, cash, public securities and retirement accounts at their haircuts. A broker can map which of your holdings fit.
Does it work for investment property?
Yes, on the depletion path, subject to underwriting. The qualifier path as described here covers a principal residence or second home. For a pure rental that cash-flows, a rental-based program may fit better.
Is the program no-documentation?
No. Every file is fully underwritten, and the assets are documented with statements. What you skip is tax returns, pay stubs and employment verification.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Bank statement, P&L-only, 1099-only and asset-based mortgages for self-employed and high-net-worth borrowers are arranged through wholesale lenders on primary residences, second homes and investment properties; every file is underwritten by the lender under its program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Investors weighing their equity options can start with Lendmire’s guide to cash-out refinance on an investment property.
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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. CFPB Regulation Z § 1026.3, Exempt transactions
2. Federal Register, Ability-to-Repay and Qualified Mortgage Standards
3. Doss Law, Business Purpose Exemption Simplified
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Best Asset-Based Cash-Out Refinance Program With a Living Trust
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.