The Quick Read: Private stock counts on only one of the two asset-based paths, and only at a discount. On the asset depletion path it is credited at 75% of the balance, while on the asset qualifier path it is not on the eligible list at all, so most of its value must be converted to cash first.
- Asset qualifier path: eligible assets must cover the whole loan, and private stock is not among them.
- Asset depletion path: private stock is credited at 75%, cash and CDs at 100%, securities at 80%, and retirement accounts at 70%.
- Depletion math: usable assets divided by 60 months become monthly qualifying income, which then runs through the debt-to-income test.
- Not eligible on either path: stock options and non-vested restricted stock units.
- Subject to underwriting: every figure here is a ceiling or floor set through select programs, never an offer.
Founders, early employees and business sellers often hold most of their net worth in shares that no one can price on a screen. That wealth is real. A lender still has to turn it into a number it can verify and, in theory, sell. This article walks through how that happens, step by step, and where it breaks.
What Is an Asset-Based Mortgage?
An asset-based mortgage qualifies a borrower on what they own, not on a paycheck. It is built for people with large balances and low documented income: retirees, business sellers, heirs, early-retired professionals and households living off a portfolio.
Two paths exist, and a borrower is qualified on one path at a time.
- Asset qualifier path. Eligible assets, after the credit percentages, must equal or exceed the entire loan amount. No employment or income is documented.
- Asset depletion path. Eligible assets, after haircuts, are divided by 60 months. The result is a monthly qualifying income that must carry the full housing payment and other debts.
Both are consumer mortgages for principal residences and second homes. Investment property is available only on the depletion path. The assets are fully documented on both paths. “No tax returns, pay stubs or employment verification” never means “no documentation.”
The path decides everything about private stock, so the rest of this piece names the path every time a figure appears.
Key Terms Defined
- Haircut: the share of an asset’s balance that a lender does not count, because of price swings or resale cost.
- Divisor: the number of months used to spread usable assets into monthly income. On the depletion path it is 60.
- Imputed income: the monthly qualifying income created by dividing usable assets by the divisor.
- Private stock: shares in a company with no public exchange price, such as a startup or a closely held business.
- Marketability discount: the markdown valuation experts apply because private shares cannot be freely sold.
- Seasoning: the time an asset has sat in an account, shown by statements, before a lender will count it.
Step by Step: How Underwriting Treats Private Stock
Underwriting follows the same order on most files across the wholesale network. Private stock enters at one specific step.
1. Pick the path. If assets can cover the entire loan outright, the qualifier path fits. If the assets are better used as income, the depletion path fits.
2. Pool the eligible accounts. Cash, CDs, money market, savings and brokerage accounts come first. Retirement accounts follow.
3. Apply the credit percentages. On the qualifier path, brokerage, CDs, money market and savings count at 100%. Retirement accounts count at 90% under age 59½ and 100% at 59½ or older. On the depletion path, the haircuts listed above apply.
4. Test private stock. On the qualifier path it has no line, so it adds nothing. On the depletion path it is credited at 75%.
5. Check the minimums. On the depletion path, qualified assets must be at least the lesser of $1,000,000 or 1.25 times the loan balance. They must never be below $250,000 liquid when depletion is the only income source.
6. Divide and test. Usable assets divided by 60 months give monthly income. That income then carries the housing payment and other debts through the debt-to-income test.
7. Document it. Statements prove ownership, and the lender’s own calculation governs.
Private stock gets this limited credit because it fails the usual tests of ease of sale, price discovery and verification. A lender tolerates that on the depletion path only because the haircut absorbs some of the risk.
Why Private Stock Gets Treated Differently From Public Stock
Public shares have a price quoted every trading day. A brokerage statement proves both the holding and the value. Private shares have neither.
Valuation professionals describe this gap openly. Carta’s guide to 409A valuations explains that private common stock cannot be freely bought and sold like public shares, and that transfer restrictions apply. Andreessen Horowitz’s explainer on the same valuation makes the related point that a discount for lack of marketability exists because there is no liquid market for the shares.
For a lender, that creates four problems.
- Price discovery. The last funding round price is not what a common share would sell for. Common stock usually ranks below preferred stock, so a headline valuation overstates what an ordinary holder owns.
- Liquidity. Even a fair price is useless if the shares cannot be sold when needed.
- Transfer limits. Shareholder agreements often restrict who can buy and when.
- Concentration. One company’s fate drives the whole value.
A 75% credit reflects a program that accepts some of that risk. The other path declines it entirely.
The Structures and Variations
The same shares can be handled in several ways, depending on path and timing.
| Situation | Qualifier path | Depletion path |
|---|---|---|
| Private stock, held | Not eligible | Credited at 75% |
| Private stock sold, proceeds seasoned | Counts as cash at 100% | Counts as cash at 100% |
| Stock options, non-vested RSUs | Not eligible | Not eligible |
| Shares after an IPO, freely tradable | Counts as brokerage at 100% | Counts as securities at 80% |
The middle two rows matter most. Once shares are sold, the proceeds become ordinary cash in a regulated account. Sale-of-business funds are also excused from the 120-day statement age rule on the depletion path. Sale proceeds still need a paper trail, and the lender reviews the source.
A tender offer or secondary sale is a clean way to turn paper wealth into documented cash. TXN Capital’s note on tender offers observes that these events show real liquidity, which tends to narrow the marketability discount in valuation practice.
How the Numbers Move: A Depletion Example
Here is an illustration of the effect. The figures are illustrative only, and the lender’s own calculation governs.
Picture a borrower with $1,200,000 in cash and CDs, which count at 100%, and $400,000 in private stock.
- With private stock counted at 75%, the $400,000 contributes $300,000. Usable assets are $1,500,000. Divided by 60 months, that is $25,000 of monthly qualifying income.
- With private stock excluded, usable assets are $1,200,000. Divided by 60 months, that is $20,000 of monthly qualifying income.
That income must still carry the full housing payment and other debts through the debt-to-income test.
The same borrower on the qualifier path gets nothing from the stock. The $1,200,000 would have to cover the entire loan on its own, at up to 80% loan-to-value on a purchase or 75% on a refinance.
Where the General Rule Breaks
These are the edge cases that decide a file.
Stock options and non-vested RSUs. Neither is eligible on either path. Only shares the borrower actually owns outright count at all.
Business accounts and business equity. Business accounts beyond the borrower’s ownership share are not published as eligible. Ownership of an operating company is a different documentation question. A borrower who documents income with deposits may fit the bank statement program instead.
Cryptocurrency, precious metals and collectibles. These 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.
Pledged or borrowed funds. They never count. Cash-out proceeds from the new loan also never count as qualifying assets on the depletion path.
Private stock inside a retirement account. This case is unclear from program publications. Raise it with the lender before applying, because the answer may differ by program.
Stale statements. On the depletion path, statements must be at least 120 days old at application, plus the most recent statement within 45 days. Moving shares or cash right before applying can break seasoning. On the qualifier path, the rule is 60 days of seasoning and two months of statements for each qualifying account.
Investment property. On the depletion path, investment property carries lower leverage: up to 65% on a purchase or rate-and-term refinance and 60% on a cash-out refinance. A first-time investor on this path needs a 700 credit score. Private stock does not change that math, but it does feed the income number that supports it. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Pure rental-property loans. 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. A borrower with a large private equity position and a rental purchase often finds the property’s rent is the better qualifier. Assets then matter mainly for cash to close, and shares still need to be liquid to help there.
What Rules Apply to the Valuation?
No federal rule sets a haircut for private stock. A creditor on a consumer mortgage must verify the income or assets it relies on using reliable third-party records, as the CFPB’s ability-to-repay rule and its eCFR text describe. The rule leaves the method to the creditor.
That is why the percentages vary program to program. Many programs on the market exclude private stock outright. The network’s depletion program credits it at 75%. A 409A report is a tax and option-pricing document, so a borrower should not assume a lender will accept it as a statement of value.
Mistakes That Sink Private Stock Files
- Using the company valuation as the asset value. A funding-round price is not the value of common shares.
- Counting options or unvested units. Neither is eligible on either path.
- Applying on the qualifier path with the stock as the gap-filler. The stock adds nothing there.
- Moving funds without a paper trail. Large or unsourced deposits create a sourcing question.
- Mixing the two paths. A borrower is on one path at a time, so a figure from one table never carries to the other.
- Assuming “no tax returns, pay stubs or employment verification” means no documents. Statements, ownership records and source of funds are all reviewed.
What the Decision Looks Like in Practice
A borrower with private equity has three realistic moves.
1. Keep the shares and use the depletion path. This works when cash and securities are large enough to meet the minimum assets rule, and the 75% credit adds income on top.
2. Convert before applying. Selling shares into a regulated account, and letting the proceeds season, puts the value in at 100% on either path.
3. Switch the product. If the goal is a rental purchase, the property’s income may carry the file, which keeps the stock out of the equation.
The first move keeps the shares but leans on a 75% credit the underwriter must accept. The second is cleaner on paper but needs a willing buyer for the shares. Tax treatment varies; consult a qualified professional.
Programs change and every file is underwritten individually, so confirm the current sheet before relying on any figure above.
Frequently Asked Questions
Do lenders ever count private stock on an asset-based mortgage?
Yes, but only on the asset depletion path, where private stock is credited at 75% through select programs. It is not on the eligible list for the asset qualifier path. Many programs in the wider market exclude it altogether, so a borrower should ask before assuming it counts.
How is private stock valued for the 75% credit?
The percentage is a haircut applied to the documented balance. The lender decides what evidence it accepts for that balance, so the underwriting file drives the result. A last-round price is not treated as proof of what common shares are worth.
Do stock options or restricted stock units count?
No. Stock options and non-vested restricted stock units are not eligible on the depletion path, and they are not on the qualifier path’s list either. Vested shares the borrower owns outright are a different matter.
Do I have to sell my shares to qualify?
Not on the depletion path, since eligible assets are not sold or pledged to produce income. Selling does turn the proceeds into cash that counts at 100% once it is seasoned and sourced. On the qualifier path, selling is usually the only way the stock adds value.
What changes after an IPO or a sale of the company?
Shares that become freely tradable can move into the securities or brokerage category, at 80% on the depletion path or 100% on the qualifier path. Cash from a sale of the business is excused from the 120-day statement age rule on the depletion path. Sourcing documents are still reviewed.
If You Are Qualifying on Assets Rather Than Income
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. Lendmire is a broker, and consumer mortgage lending is available through select lenders in states including Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia and Washington. This is not a commitment to lend.
For a borrower whose wealth sits mostly in one company, the useful question is rarely how much the shares are worth on paper. It is how much of that value can be verified, sourced and sold, and that is the number every underwriter eventually uses.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Investors who want the broader program framework can review how DSCR loans work.
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References
1. Carta, 409A Valuation Guide
2. Andreessen Horowitz, 16 Things to Know About the 409A Valuation
3. TXN Capital, 409A Valuation, Stock Buybacks and Tender Offers
4. CFPB, Ability-to-Repay Rule (Regulation Z §1026.43)
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Use an Asset-Based Mortgage to Buy a Pennsylvania Home for Your Parents? · Reserves vs Qualifying Assets on an Asset Qualifier Mortgage · How to Buy Before You Sell in Indiana Using an Asset Qualifier Mortgage
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.