The Quick Read: It depends on which of two paths you use, and your eligible assets set the ceiling on both. On the asset qualifier path, your usable assets, after credit percentages, must cover the entire loan, with leverage up to 80% on a purchase and loans up to $4,000,000. On the asset depletion path, usable assets divided by 60 months become qualifying income, and loans run from $125,000 to $3,500,000. All figures are ceilings, subject to underwriting. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
- Qualifier path: assets must equal or exceed the whole loan, and no income is documented.
- Depletion path: assets become monthly income, and that income runs through the debt-to-income test.
- A second home on the depletion path reaches 80% on a purchase and 60% on a cash-out refinance.
- Tennessee adds no state-specific program rule. State taxes and local rules affect carrying costs, not the program math.
- A borrower is qualified on one path at a time. The tables are never blended.
Lendmire is a broker. It places these consumer mortgages through select lenders in its network, and Tennessee is one of the 16 states where its consumer mortgage lending is licensed. Every file is underwritten individually, and nothing here is a commitment to lend.
What Does “Asset-Based” Mean on a Second Home?
An asset-based mortgage is reviewed around what you own instead of what you earn. It suits retirees, people who sold a business, heirs, and households living off a portfolio. Balances are large. Documented income is small or absent.
The assets are still documented. “No income documentation” never means “no documentation.” Lenders review statements, seasoning, and the source of funds. Credit is reviewed too, and the minimum score depends on the path.
This is not a home equity loan or a HELOC. Those borrow against equity in a property you already own. An asset-based mortgage finances a purchase, or refinances a home, by counting your liquid and investment balances in place of paycheck income.
A second home here means a property you occupy part of the year for personal use. If you plan to rent it out for steady income, that is a business-purpose investment property, and different programs apply. More on that below.
The Two Paths: Which One Fits Your Balance Sheet?
Across the wholesale network, the first question on every asset file is which path the borrower fits. The paths use different math and different leverage, so mixing them produces wrong answers.
| Factor | Asset qualifier | Asset depletion |
|---|---|---|
| How it works | Assets cover the whole loan | Assets ÷ 60 months = income |
| Income documented | None | Derived income, tested for DTI |
| Purchase leverage (second home) | Up to 80% | Up to 80% |
| Refinance leverage | Up to 75% | 80% rate-and-term, 60% cash-out |
| Loan amounts | Up to $4,000,000 | $125,000 to $3,500,000 |
| Main constraint | Assets ≥ entire loan | Monthly income vs. debts |
The qualifier path is the cleaner answer to “how much can I borrow.” Your borrowing ceiling is your usable assets. The lender’s ability-to-repay review rests on those assets. Whether cash-out is allowed on this path is the lender’s decision and is not published, so plan on a purchase or a standard refinance.
The depletion path fits borrowers whose assets are big but not big enough to cover the whole loan. It also fits borrowers who want to keep part of their portfolio invested. The derived income has to carry the full housing payment plus other debts. Taxes, insurance, and any association dues sit inside that payment, and a mountain or lake property can carry heavy ones.
Which Assets Count, and How Much of Each?
Each path discounts your balances differently. The percentage is the share of the balance that counts toward the test.
Asset qualifier path
| Asset | Share that counts |
|---|---|
| Brokerage accounts | 100% |
| CDs, money market, savings | 100% |
| 401(k) or IRA, under 59½ | 90% |
| 401(k) or IRA, 59½ or older | 100% |
Accounts combine. Here is the sanctioned illustration. Say a borrower seeks an $800,000 loan. They hold $330,000 in brokerage accounts (100%, so $330,000), $300,000 in a 401(k) while under 59½ (90%, so $270,000), and $200,000 in savings (100%, so $200,000). That is $800,000 of usable assets. The loan is reviewed on assets alone, subject to underwriting and the lender’s own calculation.
Asset depletion path
| Asset | Share that counts |
|---|---|
| Cash accounts, CDs | 100% |
| Securities | 80% |
| Private stock | 75% |
| Retirement accounts (any age) | 70% |
| Real-estate equity | 60% |
Now the depletion illustration. A borrower holds $1,500,000 in securities (80%, so $1,200,000) and $300,000 in cash (100%, so $300,000). Usable assets are $1,500,000. Divide by 60 months and the monthly qualifying income is $25,000. That income then carries the housing payment and other debts through the debt-to-income test. The lender’s own calculation governs.
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, business accounts beyond your ownership share, and borrowed or pledged funds are not published as eligible on either path. The documented route is to convert them into a seasoned cash balance in a regulated account. The lender reviews the source of that cash.
What Actually Limits the Number?
The maximum loan is the lowest result of several limits. Which one binds first is the question most borrowers never ask.
1. Usable assets (qualifier path). The loan cannot exceed assets after the credit percentages. A 401(k) under 59½ counts only at 90%, so retirement-heavy portfolios lose a slice.
2. Leverage cap. On a purchase, the loan is limited by loan-to-value, up to 80% on both paths for a second home. A $4,000,000 loan ceiling means little if the price and leverage cap it lower.
3. Monthly income test (depletion path). Usable assets ÷ 60 sets income. If housing costs plus other debts push debt-to-income past the program limit, the loan shrinks regardless of leverage.
4. Minimum assets (depletion path). Qualified assets must be at least the lesser of $1,000,000 or 1.25 times the loan balance. When asset depletion is the only income source, liquid assets can never be below $250,000.
5. Loan-size band. The depletion path starts at $125,000 and tops out at $3,500,000. The qualifier path tops out at $4,000,000.
6. Credit. The qualifier path publishes a 600 minimum score. The depletion path follows the lender’s score and loan-amount matrix, and a first-time investor there needs 700.
LTV is measured on the lower of price or appraised value. A home bought at one price that appraises higher is still sized on the purchase price. No state law caps these loans. The ceiling is set by each program.
Reserves are simple on the qualifier path: none required at or below 75% loan-to-value, and above that the lender sets them. The depletion path has no published reserve months. That does not mean a lender will not look at your remaining liquidity.
Down Payment vs. Keeping Your Assets Invested
The same dollar cannot be counted twice. Cash you use at closing leaves your balance sheet and cannot support the test afterward.
On the qualifier path, a larger down payment lowers the loan, so fewer assets need to count. Picture a buyer with a large brokerage balance and a smaller retirement balance. A bigger down payment may let them leave the retirement account out of the calculation altogether, since the loan needs less coverage.
On the depletion path, the pull goes the other way. Spending assets at closing lowers the usable total, which lowers the monthly qualifying income. A buyer weighing a larger down payment against a stronger income figure should run both versions before committing.
Cash-out refinances are tighter. On the depletion path, a second home refinance with cash-out caps at 60%. Cash-out proceeds never count as qualifying assets, so you cannot refinance and then use the proceeds to qualify.
Seasoning, Statements, and Credit
The assets must be seasoned and documented. This is where files stall.
Qualifier path. Assets need 60 days of seasoning, with two months of statements for each qualifying account. Large recent deposits draw questions.
Depletion path. Statements must be at least 120 days old at application, plus the most recent statement within 45 days. Funds from the sale of a business, an inheritance, or a legal settlement are excused from that seasoning.
On both paths, a gift or a transfer of money between accounts shows up on statements and gets explained. Round-number transfers between your own accounts are usually easy to document. Funds that arrived from a source you cannot trace are the usual problem.
Credit rules matter as well. Housing history is reviewed at 0x30x12. One 30-day late in the last twelve months is considered case by case. Multiple bankruptcies are not eligible, and a housing event on the depletion path needs 4 years of seasoning. Nothing here is a promise of approval.
Second Home or Rental? Where DSCR Takes Over
If you plan to rent the Tennessee property, the asset-based consumer programs above are the wrong tool. Principal residences and second homes qualify. Investment property is possible only on the depletion path, at 65% on a purchase or rate-and-term refinance and 60% on a cash-out.
Business-purpose rental financing is a different product: a DSCR loan. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The ratio is monthly rent divided by the full monthly payment, including taxes, insurance, and association dues. Some programs are available below 1.00 coverage through select lenders, but loan-to-value and terms adjust. The complete DSCR loans guide walks through the mechanics.
For rental-minded second-home buyers, the standard appraisal tools differ from consumer second-home files. Fannie Mae’s guide forms list names Form 1007, the single-family comparable rent schedule, and Form 1025, the small residential income property report. They are the usual way market rent gets documented on a one-unit or a 2-4 unit property. They are referenced here for the form names only.
A practical note. A conventional second-home loan generally does not let you count rental income to qualify. If your plan changes after purchase, the loan’s occupancy terms still govern. Raise rental intent with the lender up front.
Tennessee Context: What Changes and What Doesn’t
Nothing in the program math changes in Tennessee. The leverage, credit, and asset percentages are the same as in any state where the lender is licensed. What changes is the cost of carrying the property.
Lake homes, mountain cabins, and rural acreage tend to carry unusual appraisal questions. Comparable sales can be thin, and the appraiser may need to look farther out. Some properties, such as acreage-heavy or unconventional builds, may be treated differently by individual lenders. Ask early.
Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income. On the tax side, the Tennessee Department of Revenue notes that marketplaces booking dwellings for under 30 continuous days remit local occupancy tax. Its short-term rental reporting page sets business tax and license thresholds at $100,000 or more in gross receipts in a jurisdiction, and a minimal activity license for $3,000 to $100,000. Those are net-cash-flow items. They do not change the qualification formula on a consumer second-home loan.
Tax treatment varies; consult a qualified professional.
Key Terms Defined
- Asset qualifier: the path where eligible assets, after credit percentages, must equal or exceed the entire loan.
- Asset depletion: the path that divides usable assets by 60 months to create monthly qualifying income.
- Usable assets: the balance that counts after the program’s percentages are applied.
- Seasoning: the length of time funds must sit in your account before they count.
- Loan-to-value (LTV): the loan amount divided by the lower of price or appraised value.
- Debt-to-income (DTI): monthly debts, including the new housing payment, divided by monthly income.
Who Fits, and When Something Else Is Better
The qualifier path fits borrowers with large balances in accounts that count at or near 100%, who do not want to document income at all. It is a poor fit if most wealth is in business accounts, crypto, or real estate.
The depletion path fits borrowers who need leverage on a larger purchase and have portfolio balances to convert. It is a poor fit if you are close to the minimum-assets rule or already carry heavy debts.
The bank statement program is a different product, for borrowers who document income with deposits. Conventional and full-documentation jumbo loans rely on traditional personal-income documentation and paystubs. A HELOC borrows against equity in a home you already own. For a second home you will rent, DSCR is the route.
Frequently Asked Questions
Is there a Tennessee-specific asset-based mortgage rule?
No. The program parameters do not change by state. Tennessee affects property taxes, insurance, appraisal comps, and local rental rules, not the asset percentages or leverage caps. Lendmire’s consumer lending is licensed in Tennessee among 16 states.
Can I use my 401(k) or IRA?
Yes, with a haircut. On the qualifier path, retirement balances count at 90% under age 59½ and 100% at 59½ or older. On the depletion path, they count at 70% at any age. You do not have to withdraw the funds, subject to underwriting.
Do I need traditional personal-income documentation or W-2s?
Not on the qualifier path, which documents no employment or income. The depletion path derives income from your assets. Statements, seasoning, and credit are documented on both, so this is never a no-documentation loan.
Is this the same as a HELOC?
No. A HELOC borrows against equity in a property you own. An asset-based mortgage finances a purchase or refinance by counting your liquid and investment balances. Real-estate equity can count on the depletion path at 60%, but it is part of the asset total, not the loan itself.
Can I buy the home to rent out?
Not through the second-home programs, which are for personal use. Rent-driven financing is DSCR, which looks at the property’s income against its payment.
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.
Tennessee’s lake and mountain markets reward the borrower who knows which constraint binds first, before the contract is signed.
Lendmire’s asset-based mortgage in Tennessee page presents the program for Tennessee borrowers.
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. Fannie Mae – Selling & Servicing Guide Forms
2. Tennessee Department of Revenue – Local Occupancy Tax
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: What Counts as an Asset Statement for a Mortgage? · How a Margin Balance Is Treated on an Asset Depletion Mortgage · How Long Should Money Sit in an Account Before an Asset-Based Mortgage Application?
Guides: Asset-Based Mortgage in Tennessee
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.