How Asset Depletion Income Is Calculated From Your Portfolio

The Quick Read: Asset depletion income is a qualifying figure, not a paycheck: the lender takes your verified, eligible assets, subtracts the money the purchase itself will use, and divides what is left by a set number of months, so the portfolio you keep becomes a monthly income number that can be tested against your debts. You do not sell anything. The divisor, the account mix, and the deductions decide how big the number gets.

• The formula: eligible assets, minus funds needed for the transaction, divided by the program’s number of months.
• Not every dollar counts: cash usually counts most fully, while brokerage and retirement balances are typically discounted.
• Your down payment comes out first, so a bigger down payment shrinks your own qualifying income.
• The divisor swings the result most. Halve it and the income doubles.
• Nothing is standardized. Each program sets its own rules, so the same statements can produce very different income.

What Asset Depletion Income Actually Is

Asset depletion is a way to qualify, not a separate loan product. It goes by other names: asset utilization, asset qualifier, or asset-based qualification. The idea is simple. Some borrowers hold large portfolios but show little taxable income. A retiree living on investments is the classic case. Lendmire’s piece Asset Depletion vs Asset Qualifier for a Retiree Living on Portfolio Income covers that pairing.

The lender treats the portfolio as if it would be spent down evenly over a fixed period. That spend-down is imaginary. You keep the assets, they stay in your name, and the calculation says nothing about how long your money will last. It is a measuring convention, like a ruler.

Across Lendmire’s wholesale network, asset depletion is reviewed on documented assets rather than documented income, under the applicable program and subject to lender guidelines. It sits next to bank statement qualification, where income comes from 12 months of deposits. Asset depletion works from balances instead.

Step 1: Which Accounts Count, and How Much of Each

Most programs count liquid and near-liquid accounts: checking, savings, money market, certificates of deposit, brokerage, and retirement accounts. You prove each one with recent statements and proof that you own it. Retirement accounts also need evidence that you can reach the money.

Then comes the haircut. A haircut is the percentage a lender trims off an account before counting it. Stocks move, and retirement money may carry penalties or taxes if pulled early. So programs usually count cash more fully than market-based or retirement balances.

The exact percentages differ from program to program. Some programs also vary retirement treatment by your age. Nobody publishes one industry formula. Anyone quoting you a single haircut as universal is guessing.

Step 2: What Comes Out Before You Divide

The pool shrinks again before any division happens. The lender subtracts money that is already spoken for. That usually means your down payment, closing costs, and required reserves. Reserves are cash a lender wants left in the bank after closing. Programs we place files with commonly look for about six months of the housing payment.

The logic is simple. A dollar cannot do two jobs. If it pays for the house, it cannot also be treated as income-producing. This is why borrowers with a big down payment are surprised. Putting more cash into the purchase directly lowers the qualifying income.

The reserve step trips people up the most.

Step 3: The Divisor Does the Heavy Lifting

The divisor is the number of months the program divides the net pool by. A shorter divisor produces more monthly income from the same assets. A longer one produces less. Cut the divisor in half and the income doubles. That is plain arithmetic.

Programs set the divisor for their own reasons, and it changes over time. Even the big mortgage agencies disagree. Freddie Mac’s Guide bulletin on accumulated assets as income lowered its division factor from 240 to 180. Freddie Mac is an agency, not a DSCR or alt-doc source, so the point here is only that the divisor is a policy choice, not a law of nature.

This is also why a single online calculator can mislead you. If it ignores haircuts or deductions, or assumes a divisor your lender does not use, the answer is an estimate at best.

How Asset Depletion Income Is Calculated, Step by Step

Here is the full chain from portfolio to loan size, with relative numbers instead of dollars. These are modeled steps, not market data.

1. Start with statement balances. Call the total 100 units across cash, brokerage, and retirement.

2. Apply haircuts. Cash stays near full value. Brokerage and retirement shrink. The counted pool is now less than 100 units.

3. Subtract the transaction. Take out the down payment, closing costs, and reserves. What remains is the net pool.

4. Divide by the divisor. Net pool divided by the program’s months gives monthly qualifying income.

5. Add other income. Social Security, a pension, or part-time earnings can sit alongside it.

6. Run the debt test. Many programs divide your total monthly debts by total income. That is your debt-to-income ratio, or DTI. The program caps it. Income times the cap, minus your other debts, sets the ceiling on the housing payment.

7. Check the loan size and leverage. On a primary residence, asset depletion qualifying runs to about 80% LTV through select lenders. LTV is the loan amount divided by the property value. Loan sizes in the network run from $125,000 to $3,500,000. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.

A few programs skip the DTI step. Some test residual income, meaning what is left each month after debts. Others simply confirm that assets cover the loan, cash to close, and reserves. The program sheet tells you which test applies.

Working Backward From a Target Income

You can reverse the math. Multiply the income you need by the divisor, then add back the transaction deductions. Then grow that total to offset the haircuts. The result is roughly the gross portfolio you need. It is an estimate, because haircuts differ by account.

What Moves the Number

Four levers move the result, and they are not equal.

• Divisor: the biggest swing. It changes income in direct proportion.
• Down payment and reserves: every dollar kept in the deal is a dollar removed from the pool.
• Account mix: a portfolio heavy in cash beats the same total heavy in retirement funds.
• Balance changes: most programs work from your latest statements, so a market drop before closing can lower the pool. A large cash move can also draw questions.

Two borrowers with identical portfolios can land far apart. One is a cash-heavy buyer putting 20% down. The other holds mostly retirement money and puts more down. The first usually shows meaningfully more income under the same program.

Where the General Rule Breaks

Agency programs are narrower. Fannie Mae’s Selling Guide section on employment-related assets counts only retirement accounts and employment lump sums. It excludes investment property. It subtracts a penalty first if a full distribution would trigger one. And it requires co-owners of the assets to be co-borrowers. Freddie Mac’s newer rule is broader and permits investment property. A compliance-news summary from TENA adds a test: a depository account that fell more than 20% over the prior 12 months can be ineligible unless the drop is documented as a transfer. These are agency rules. They do not govern the alt-doc programs we place files with, which set their own terms.

Jumbo loans. The agency rule does not reach jumbo loans. Non-agency lenders fill that gap with their own asset programs.

Joint ownership. If an account is shared, expect the owners to be on the loan or to sign off. Lenders do not want to count money someone else can withdraw.

Penalty-adjusted retirement money. Under some programs, an account you could only reach with a penalty counts for less. Others handle it through the haircut. Tax treatment varies; consult a qualified professional before relying on any deduction.

Restricted, business, foreign, or borrowed assets. Programs generally exclude them or count them far less. Restricted stock, business operating accounts, funds held abroad, and money you borrowed against do not help.

Large recent deposits. A big deposit needs a paper trail. Expect to show where it came from.

Which Occupancy Decides the Rules

The property’s use changes how the file is handled. An owner-occupied purchase or refinance, meaning a primary residence or second home, is a consumer mortgage. TRID disclosure rules apply to it. A non-owner-occupied rental, including a short-term rental, is a business-purpose loan and is exempt from TRID.

Leverage also changes. Primary-residence purchase and rate-term files on bank statement documentation reach up to 90% LTV through select lenders, and the asset depletion alternative reaches about 80% on a primary residence. Owner-occupied cash-out tops out at 80% LTV. Investment-property cash-out tops out around 75% LTV. Investment-property purchase leverage on alt-doc varies by lender, so treat it as a case-by-case question. Terms and length follow each lender’s program sheet. All of this is subject to lender guidelines.

Asset Depletion or DSCR? Pick the Stronger Story

DSCR loans test the property’s rent against its debt, not your personal income. Asset depletion is a different documentation path. It substitutes a personal income figure built from your portfolio. It is not a DSCR requirement, and a DSCR loan does not need it.

Investors with large portfolios but thin tax-return income sometimes have two routes. The question is which story is stronger.

Note that asset depletion still runs through DTI in many programs. It does not remove debt or property-count limits the way a DSCR file can. For the full picture on the rental side, see the complete DSCR loans guide.

Common Calculation Mistakes

• Using the statement balance as the pool. Haircuts and deductions shrink it.
• Forgetting reserves. The reserve subtraction is the step people miss most.
• Assuming the income equals the payment you can afford. It is income. The debt test still follows.
• Believing the lender takes your assets. The assets stay yours. The spend-down is a qualifying convention.
• Assuming one national formula. It does not exist.
• Trusting a generic calculator. The result is only an estimate.
• Spending the same dollars twice. Money used for income cannot also fund the down payment or reserves.

What to Do Next

Gather your latest statements for every account and decide which ones you would rather keep as reserves. Then compare programs on divisor, haircuts, and whether the file runs through DTI. If you hold a large portfolio and want to see how the numbers work, Lendmire can help you compare alt-doc options based on your assets, the property, credit profile, leverage, and your goals. Lendmire’s consumer alt-doc programs are available in 16 states. Reach the team at 828-256-2183 or through the quote request page.

Key Terms Defined

Asset depletion: a qualifying method that turns eligible assets into an imputed monthly income figure.

Haircut: the percentage a lender subtracts from an account’s value before counting it.

Divisor: the number of months the net asset pool is divided by.

Net pool: eligible assets after haircuts and after subtracting the down payment, closing costs, and reserves.

DTI (debt-to-income): total monthly debts divided by total monthly income.

LTV (loan-to-value): the loan amount divided by the property’s value.

Reserves: cash a lender wants you to keep after closing.

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

About Lendmire

A DSCR-focused mortgage broker, Lendmire (NMLS# 2371349) places investor financing across 41 markets — 40 states plus Washington, D.C. — with DSCR eligibility generally reviewed by the lender on property cash flow instead of traditional personal-income documentation, subject to lender guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in 2025 and 2026.

References

1. Freddie Mac Guide bulletin on accumulated assets as income

2. Fannie Mae Selling Guide: Employment Related Assets as Qualifying Income

3. TENA summary of the Freddie Mac bulletin