Conventional Loans for Buyers Living on Savings Instead of a Paycheck

The Quick Read: A conventional loan can work without a regular paycheck, but only when the lender can turn your savings into qualifying income by formula. That method is an underwriting approach inside a standard conventional loan, not a separate product. It depends on how much is left in your accounts after the purchase uses its cash, which agency’s rules the lender follows, and how much you put down.

Most people who live on savings are retirees, recent business sellers, or people between jobs. They have real money and little pay-stub income. Standard underwriting is built around paychecks, so the file needs a different route. Several agency rules decide whether that route works for you. This guide walks through the mechanics, the edge cases, and the decision in practice.

What Does “Living on Savings” Mean to a Lender?

A lender needs to see that you can repay the loan. Federal ability-to-repay rules allow that to rest on income, on assets, or on both. The assets cannot include the value of the home that secures the loan. Equity in the house you are buying does not count.

Neither Fannie Mae nor Freddie Mac uses the phrase “asset depletion.” That is a market term. In the agency guides, the policy appears as Fannie Mae Selling Guide B3-3.4-06, which covers employment-related assets as qualifying income. Freddie Mac files its version as “accumulated assets as income.”

Lenders sometimes sell non-QM “bank statement” or asset products under similar names. Those are different programs with their own pricing and rules. This article stays in the standard conventional lane.

Key Terms Defined

Qualifying income: The monthly figure a lender uses to measure whether you can carry the loan. It can come from pay, pensions, or a formula applied to your assets.

Net eligible assets: The balance that counts after the lender subtracts what the purchase uses and any penalty for taking the money out.

Debt-to-income ratio (DTI): Your monthly debts, including the new housing cost, divided by your qualifying monthly income.

Automated underwriting finding: The decision from the agency’s software. Across the wholesale programs Lendmire places files with, the automated finding governs most files.

LTV (loan-to-value): The loan amount as a percentage of the lesser of the price or the appraised value.

How the Loan Is Underwritten, Step by Step

Here is the sequence a lender follows on a savings-based file.

1. Pick the method. The lender chooses between the Fannie Mae route and the Freddie Mac route. They differ in important ways, covered below.

2. Identify eligible assets. Retirement accounts are the core case. The guides set conditions on who owns the assets and whether you can reach them without penalty.

3. Net out what the deal consumes. Money used for the down payment and closing costs cannot also count as income. This is the step that surprises most borrowers. Spending $1 on the purchase shrinks the base the formula works from.

4. Convert to monthly income. The guide sets a formula that divides eligible assets by a fixed number of months. Under Freddie Mac’s updated rule, that divisor drops from 240 to 180. A smaller divisor produces more monthly income from the same balance.

5. Run the debt-to-income ratio. The converted figure goes in as income alongside anything else you earn. A 50% total ratio ceiling is common on automated files in the wholesale programs Lendmire places loans with, subject to lender guidelines.

6. Run automated underwriting. Freddie Mac requires an Accept finding when accumulated assets serve as income. Fannie Mae files run through Desktop Underwriter.

7. Document the assets. Expect bank or investment statements, or a Verification of Deposit. Fannie Mae’s verification of deposits and assets policy says statements must identify the institution and you as the account holder. Unverified funds do not count.

8. Appraise the property. The appraisal is the normal conventional one. It still matters here, because a low value can push a file above a leverage cap.

9. Close. Credit score, reserves, property type, and lender overlays all still apply.

Move money before you apply, not between statements. Large, unexplained deposits slow a file down. Lenders ask where they came from, and a paper trail answers that question.

How Do Fannie Mae and Freddie Mac Differ?

They differ on leverage, occupancy, loan purpose, and the divisor. Treat them as two separate rulebooks.

The leverage gap is the biggest practical difference. Under Fannie Mae’s version, you generally need at least 30% down at 70% LTV. If the asset owner is 62 or older at closing, 20% down at 80% LTV works. Jointly owned assets add a condition: all owners must be borrowers, and the borrower using the income must be 62 or older to reach the 80% limit.

Freddie Mac’s change, described in Bulletin 2026-10, removes the old 80% cap and the age restriction on depository accounts and securities. It becomes mandatory for settlement dates on or after February 3, 2027. Sellers may adopt it earlier, so lenders may be on different versions. Whether a given lender has adopted it yet is a fair first question.

The Fannie Mae rewrite has its own history. It moved this policy to B3-3.4-06 from an older section number. Fannie Mae describes the move as a restatement for clarity that did not change the policy’s intent or requirements.

For this audience, the investment-property allowance is only a contrast. You are buying a place to live.

What Counts as an Eligible Asset?

Retirement accounts are the core case, and the conditions focus on ownership and access. Assets must belong to you individually, or a co-owner must be a co-borrower. If a penalty would apply to a full withdrawal, Fannie Mae subtracts it, after transaction costs, before the income figure is calculated. Under Freddie Mac, penalty-free access is the condition.

Other depository accounts and securities can count too. The guides set a formula for stocks, bonds, and mutual funds. Read the B3-3.4-06 page for the specifics. Foreign assets must be converted to U.S. dollars and held in a U.S. or state-regulated institution before they count. That is spelled out in Fannie Mae’s foreign assets policy.

If your assets miss the asset-income parameters, they may still count under other standard income policies. Examples are interest and dividend income, or annuity, pension, and retirement income. A retiree already taking regular distributions may do better through those routes than through the formula.

Where the General Rule Breaks

A few situations change the answer.

• Refinance type. Fannie Mae allows this route on a limited cash-out refinance. Freddie Mac allows a no cash-out refinance. Neither allows a full cash-out refinance.
• Small accounts. Freddie Mac’s $30,000 net floor means a modest account cannot use this route at all.
• Low appraisal. The leverage caps use the lesser of price or appraised value. A short appraisal can push a Fannie Mae file above 70% or 80%.
• Joint ownership. Under Fannie Mae, every owner of the assets must be a borrower.
• Early withdrawal penalties. They reduce the counted balance under Fannie Mae.
• Government loans. FHA, VA, and USDA follow their own rules, so do not assume this applies to them.

Taxes belong in this list too. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit. The IRS is the place to start for general questions.

Down Payment Math Without Dollar Figures

Think in percentages. On a standard purchase, the programs Lendmire works with allow 97% LTV (3% down) for a first-time buyer on a one-unit primary residence with a fixed rate, and 95% LTV (5% down) otherwise. Those are the general conventional ceilings, subject to lender guidelines.

The savings-as-income route is stricter. Because Fannie Mae holds it to 70% or 80% LTV, the down payment is far larger than the standard minimum. Here is the tension. A larger down payment drains the assets that produce your income. A smaller down payment raises leverage past the cap. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.

Picture a retiree buying a primary residence with a large taxable brokerage account. If the price is a stretch, the down payment pulls the balance down and the formula yields less income. Each dollar at closing reduces both the savings and the income they produce. Sometimes the right fix is a lower price. Sometimes the right fix is a different income route, such as the retirement-distribution path.

Mortgage insurance is the other piece. Above 80% LTV it is required. You may request cancellation at 80% of the original value with good payment history, no subordinate liens, and no decline in value. The servicer must end it automatically at 78%. On the asset-income route, most files sit at or below 80% LTV, so mortgage insurance often never enters the picture.

Reserves, Credit, and the Rest of the File

Asset-based income does not waive the rest. The wholesale conventional programs generally start at a 620 decision score, with the automated finding governing most files. Reserve requirements, property type, and lender overlays still apply.

After a credit event, the agencies set waiting periods. They are four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.

One distinction trips people up. Large balances do not guarantee approval. The loan still needs an acceptable automated finding, adequate credit, and a property that appraises.

Common Misconceptions

• “There is an asset depletion loan product.” It is a method inside a conventional loan.
• “Every dollar in my accounts counts.” The formula applies after subtracting deal costs and any penalty.
• “I can use equity in the house.” Federal ability-to-repay rules exclude the value of the home securing the loan.
• “Fannie and Freddie work the same.” They differ on leverage, occupancy, refinance type, and divisor.
• “No income means no verification.” The lender must verify assets with reliable third-party records.
• “The new Freddie Mac rules apply everywhere now.” They become mandatory in February 2027, and each lender chooses whether to adopt them sooner.

What the Decision Looks Like in Practice

This is where the advisory judgment matters.

For a buyer age 62 or older with sizable retirement balances and a large down payment, the Fannie Mae route at 80% LTV can be a clean fit. For a younger buyer between jobs, the 70% cap means more cash at closing, and the Freddie Mac version, once adopted by the lender, may offer more room. For a buyer with a modest account, the $30,000 floor or the formula may leave too little income, and a different path is worth exploring.

A reasonable self-check before you contact a lender:

1. Are the assets titled in my name, or does a co-owner need to be on the loan?

2. How much will the down payment and closing costs take out of them?

3. Would withdrawing the funds trigger a penalty?

4. Do I have two or more months of statements?

5. Can I explain every large deposit?

6. Which agency’s rules would my lender follow?

Lendmire’s conventional loan programs page lays out the standard options these loans sit within. Buyers newer to the process may also find Lendmire’s piece Does a Wholesale Broker Help First-Time Buyers Get a Conventional Loan? useful.

If you are buying a home and want to see whether a conventional loan fits your file, Lendmire can help you compare the options and what each one asks of the file. Every figure here is subject to lender guidelines and full file review, and none of it is a commitment to lend.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans 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. Fannie Mae Selling Guide B3-3.4-06, Employment Related Assets as Qualifying Income

2. Fannie Mae Selling Guide B3-4.2-01, Verification of Deposits and Assets

3. Freddie Mac Bulletin 2026-10

4. Fannie Mae

5. Fannie Mae, Income Assessment Simplified

6. Fannie Mae B3-4.2-05 Foreign Assets

7. IRS