The Quick Read: Severance helps you buy a home as cash, not as a paycheck: lenders count only the net money that has landed in your account, then either let those assets cover the loan outright, turn them into monthly qualifying income, or, for a rental, judge the property’s rent against its payment. Your job status is not the deciding input on any of these routes. Your balances, credit, and the property are. Lendmire, a mortgage broker, arranges these loans through select lenders in its wholesale network.
- Severance is cash and reserves to a lender, never ongoing income.
- Only money already deposited in your name counts. Future installments do not.
- On an asset-based home loan, a fresh deposit still has to season, so timing matters.
- For a rental, qualification rests on the property’s rent versus its payment, and severance mostly funds the down payment and reserves.
- Spending all of it on the down payment can leave you with no runway. Size the purchase to your cash needs, not just the program ceiling.
Key Terms Defined
Asset qualifier path: a program route where eligible assets, after credit percentages, must equal or exceed the entire loan amount. No employment or income is documented.
Asset depletion path: a route that divides usable assets by 60 months to create a monthly qualifying income. That income then runs through the debt-to-income test.
Seasoning: the time money must sit in your account, shown by statements, before a lender treats it as yours.
DSCR (debt service coverage ratio): monthly rent divided by the full monthly payment on the property, including principal, interest, taxes, insurance, and any HOA dues.
LTV (loan-to-value): the loan amount as a percentage of the property’s value or price.
Supplemental wages: pay outside regular wages, such as bonuses and severance, which employers withhold taxes on using special methods.
What Does a Lender Actually See in Severance?
A lender sees a one-time deposit. It does not see a salary. That distinction drives everything else here.
Severance has an end date. A paycheck is expected to continue, and severance is not. So income-based underwriting generally treats it as a weak foundation, and many borrowers expect it to “count” and are surprised when it does not.
Cash is different. The same money, once it sits in your savings account, is an asset. On the asset-based home programs Lendmire places, assets are the whole point. On a rental loan, assets show you can fund the down payment and still hold reserves.
Large banks and retail lenders can use severance as income in narrow cases. Fannie Mae’s Selling Guide allows employment-related assets as qualifying income only on principal residences and second homes, never investment properties. That is agency territory, and it is the exception. Wholesale non-QM programs take a different route entirely.
Which Path Fits Your Situation?
Three routes cover most people who are between jobs with cash in hand. Pick one at a time. A borrower is qualified on one path, never a blend.
| Path | Best fit | Role of severance |
|---|---|---|
| Asset qualifier | Assets can cover the whole loan | Counts as cash toward the balance |
| Asset depletion | Large portfolio, little income | Adds to the pool divided by 60 |
| DSCR rental loan | Buying or refinancing a rental | Down payment and reserves |
The first two are consumer mortgages for a principal residence or second home. The depletion path also reaches investment property, at lower leverage. The third is a business-purpose investor loan.
Most people reading this have a severance of some size and a savings account that is bigger than the severance. That mix matters. The severance alone rarely carries a loan on either asset path. Added to existing savings, brokerage balances, and retirement accounts, it can.
How Underwriting Treats Your Severance, Step by Step
Here is how the file generally unfolds across the network.
1. The package arrives, net of withholding. Employers treat severance as wages. The IRS lists it among supplemental wages and sets a flat 22% federal withholding rate for the optional flat method, though an employer may use the aggregate method instead. Withholding is an estimate of your tax bill, not the final tax. The lender sees the deposit, not the gross number in your separation agreement.
2. The money lands in your own name. Statements are the primary proof. Lenders usually want the paper trail: the separation agreement, a final pay record or direct-deposit trail, and the statements showing the funds.
3. Credit gets pulled. Most programs use the middle of your three scores and price in tiers. The asset qualifier path has a 600 minimum score. The depletion path follows the lender’s matrix, and a first-time investor on that path needs 700. All of this is subject to underwriting.
4. The property gets reviewed. An appraisal checks value. On a rental, it also includes a market-rent analysis.
5. The lender counts what remains. Money used for the down payment cannot also be counted as reserves. This is where most borrowers misjudge their own numbers.
6. No employment call, no pay-stub review. The assets are still fully documented. “No income documentation” never means “no documentation.”
Seasoning: The Catch With Fresh Money
A severance deposit that landed last week is not yet fully usable on the asset paths. Seasoning rules apply.
On the asset qualifier path, assets typically need 60 days of seasoning and two months of statements for each qualifying account. On the asset depletion path, statements need to be at least 120 days old at application, plus one recent statement within 45 days. That path excuses sale-of-business, inheritance, and legal-settlement funds from the seasoning rule. Severance is not on that list.
So the practical move is to bank the money early and leave it alone. If you can, deposit it into one account in your name and avoid shuffling it. Every transfer adds a line item the underwriter must trace. Lendmire’s piece How to Source a Large Deposit on a Bank Statement Mortgage walks through that documentation habit in detail.
Not ideal if you need to buy this month. Fine if you can plan ahead.
Structures and Variations: Where Your Severance Sits Matters
The form your severance takes, and where you park it, changes how much of it counts. The percentages below are program shares, subject to underwriting, and each column is a separate path.
| Where the money sits | Asset qualifier path | Asset depletion path |
|---|---|---|
| Savings or checking | 100% | 100% (cash) |
| Certificate of deposit | 100% | 100% |
| Brokerage account | 100% | 80% (securities) |
| 401(k) or IRA | 90% under 59½; 100% at 59½+ | 70% at any age |
| Unvested RSUs, stock options | Not published as eligible | Not eligible |
Installments. Salary-continuation severance is a promise, not a balance. Lenders count what is already in your account. Unpaid future payments are not an asset.
Employer equity in the package. Unvested awards are not liquid, so they do not count as assets on the depletion path. If you can sell vested shares and hold the proceeds in a seasoned cash account, the cash is what counts.
Other assets. Crypto, precious metals, and collectibles are not published as eligible on either path. The documented route is converting them to a seasoned cash balance in a regulated account, with the source reviewed by the lender.
On the depletion path, deferred compensation, escrow accounts, foreign funds, and cash on hand are also not eligible. Check that your package does not rely on one of those.
A Worked Illustration
Say your depletion-path file shows $1,500,000 in securities, which counts at 80% for $1,200,000. Add $300,000 in cash at 100%. Usable assets total $1,500,000. Divide by 60 months and you get $25,000 of monthly qualifying income. That income then carries the housing payment and other debts through the debt-to-income test.
If part of that cash is severance, it counts only once it is deposited and documented. These numbers are illustrative, and the lender’s own calculation governs.
On the qualifier path, the shape is simpler. An $800,000 loan with $330,000 in brokerage accounts (100%), $300,000 in a 401(k) under 59½ (90% = $270,000), and $200,000 in savings (100%) counts $800,000 of usable assets. That is reviewed on assets alone, subject to underwriting.
Depletion minimums are real, though. Qualified assets must be at least the lesser of $1,000,000 or 1.25 times the loan balance. When assets are your only income source, liquid funds must also never fall below $250,000. Most severance packages, alone, do not clear that. They top off a larger pool.
Leverage and Loan Size, Path by Path
Leverage depends on the path and the occupancy.
No reserves are required at or below 75% LTV, and above that the lender sets them. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
On the asset depletion path, a principal residence or second home can go up to 80% on a purchase or rate-and-term refinance and 60% on a cash-out refinance. An investment property goes up to 65% on a purchase or rate-and-term refinance and 60% on a cash-out. Loan amounts run $125,000 to $3,500,000. Cash-out proceeds never count as qualifying assets.
These are ceilings, not offers. Credit, property, and file strength set where you land.
Buying a Rental Between Jobs (DSCR)
A rental changes the picture. Being between jobs does not enter the qualification math on a DSCR loan.
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. The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Your credit, down payment, and reserves are still reviewed. Identity, an appraisal, and bank statements remain in the file.
Here the severance does its best work. It funds a larger down payment, which lowers LTV. It also covers reserves, which lenders often raise when coverage is thin. If the rent just clears the payment, a bigger down payment can help. If coverage falls below 1.00x, select lenders in the network do offer programs, but LTV and terms adjust. Do not assume it works without checking.
The complete DSCR loans guide explains the ratio and how lenders review it. Closing in an LLC is common on rentals, subject to program terms, and a personal guarantee is typically involved.
One caution on refinances. If you own a rental and consider cash-out, the proceeds must serve the business purpose the loan claims. Using them for personal living costs during unemployment can change how the loan is classified. Treat that as a hard line.
Down Payment Versus Runway
The question is not whether your severance can fund the purchase. It is whether it should.
With no paycheck, your cash is your personal runway. Every dollar into the down payment is a dollar you cannot spend on groceries or a vacancy. Lenders want reserves too, so the cash serves two masters.
Picture three borrowers.
The portfolio holder has large brokerage balances and a modest severance. The asset path likely carries the loan, and the severance stays untouched as living money. Easy call.
The cash-heavy seller has a large severance and moderate savings. Putting it all down lowers LTV but leaves nothing for a long job search. The stronger play might be a smaller down payment with healthy liquidity, even if the loan terms are less ideal.
The rental buyer has a decent severance and a solid single-family target. Here, a DSCR purchase with a conservative down payment plus a full reserve cushion often beats an all-in purchase. Vacancies happen, and a job search can run long.
Genuinely a toss-up in some cases, since a larger down payment lowers risk on the loan while a smaller one lowers risk on your life. Run both versions before you commit.
Set aside money for the tax true-up too. 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 to Apply and When to Wait
Timing is where a severance reader gains the most.
- Before your last day: apply while still employed if you want the option. The asset paths do not need your job, but a smoother file never hurts.
- After the deposit lands: season the money. Leave it in one account and keep statements ready.
- During the severance window: this is usually the best time to apply if seasoning is satisfied, because the balance is at its peak.
- After a new job starts: a new paycheck opens conventional routes again. Whether that beats the asset route depends on the property and the program.
One more planning point has nothing to do with lending. Severance can interact with unemployment benefits. Massachusetts legal-aid guidance says unconditional severance can delay eligibility for the period it covers, and state rules differ. Check with your state agency before counting on benefits.
What If You Are Laid Off Mid-Process?
Tell your loan officer right away. Hiding it does not help.
On an asset-based file, the loan never rested on your job, so a layoff may not change the outcome. The assets and seasoning still decide it. On an income-based file, a layoff can stop the loan, and severance rarely replaces the lost paycheck in that setting.
If your current file leans on a paycheck that just vanished, ask about moving to an asset path or, for a rental, DSCR. That is a re-submission, not a rescue. Each path needs its own documents, and it is subject to lender approval.
Mistakes to Avoid
- Counting gross severance. The lender sees the net deposit.
- Moving money repeatedly. Each transfer needs explaining.
- Spending the reserve. Cash used on the down payment cannot be reserves too.
- Mixing paths. Quote one path’s figures only against that path.
- Assuming a rental behaves like a home. The agency severance-as-income rule stops at investment properties.
- Relying on installments. Only received money counts.
Frequently Asked Questions
Does severance count as income for a mortgage?
Not directly on the programs described here. On the asset paths, severance counts once it is cash in your account, either as part of the assets covering the loan or as part of the pool divided by 60 months. On a DSCR rental loan, it counts only as down payment and reserves, subject to lender guidelines.
Can I use severance as a down payment?
Yes, once it is deposited in your name and documented. On the asset qualifier path, it usually needs 60 days of seasoning. On a rental purchase, the lender reviews the source and checks that reserves remain after closing.
Do I need a new job before I apply?
No, if you qualify on assets or on a rental’s income coverage. The asset qualifier path documents no employment or income. Credit, assets, and the property are reviewed instead, subject to underwriting.
What if my severance is paid in installments?
Only the money already received counts. Future payments are a promise, not an asset. If you can wait for more installments to land and season, the file gets stronger.
Can I buy a rental while between jobs?
Often, yes. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Your severance helps fund the down payment and reserves.
Next Steps
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. Consumer mortgage lending is available in 16 states: Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia, and Washington. Reach the team at 828-256-2183.
Whatever you decide, the severance that buys you a house is also the money that buys you time, and the best files leave room for both.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging bank statement and other alternative-documentation mortgages — P&L-only, 1099-only and asset-based paths — through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B3-3.4-06
3. Massachusetts Legal Services: severance and unemployment benefits
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 to Qualify for an Assets-Only Mortgage · How to Qualify for a Mortgage on Liquid Assets Alone · How an Asset Depletion Mortgage Works
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.