The Quick Read: Usually 80% of the balance counts when the fund sits in a taxable account on the asset depletion path, because the network treats mutual funds as securities, and retirement-held funds count at 70% at any age. Subject to underwriting, that figure is then pooled with other eligible assets, reduced for any funds needed in the transaction, and divided by 60 months to produce monthly qualifying income.
- Taxable mutual funds: 80% on the asset depletion path.
- Mutual funds inside a 401(k) or IRA: 70% at any age on that path.
- On the asset qualifier path, brokerage accounts count at 100%, and retirement balances at 90% under 59½ and 100% at 59½ or older.
- Cash and CDs count at 100% on the depletion path.
- Statements, seasoning and the lender’s own calculation govern every file.
Hold a large fund balance and little documented income, and the question is real. Which path you pick changes the answer by a wide margin. This piece walks through both, shows the math, and flags where files stall.
Which Path Are You On?
Two separate paths exist, and a borrower is qualified on one at a time. Never blend their tables.
The asset qualifier path covers the entire loan with eligible assets. No employment or income is documented. The asset depletion path turns usable assets into monthly income by dividing by 60 months, and that income runs through the debt-to-income test.
Across the wholesale network, the mutual fund question looks different on each. On the qualifier path, a fund held in a brokerage account is simply a brokerage account at 100%. On the depletion path, the same fund is a security and takes the 80% haircut. A haircut is the cut to the balance that accounts for market swings.
This is consumer mortgage lending for principal residences and second homes, with investment property available only on the depletion path. Consumer lending is licensed in 16 states, so availability depends on where the property sits. Everything here is through select programs, subject to underwriting.
How Much Counts, Path by Path
The percentage depends on the account type and the path. Here is the side-by-side for the assets a fund investor typically holds.
| Asset | Qualifier path | Depletion path |
|---|---|---|
| Mutual funds in a taxable brokerage account | 100% | 80% (securities) |
| Cash, savings | 100% | 100% for cash accounts |
| Certificates of deposit | 100% | 100% |
| Funds inside a 401(k) or IRA | 90% under 59½; 100% at 59½+ | 70% at any age |
| Private stock | Not listed | 75% |
Notice the pattern. The qualifier path is more generous per dollar, but it must cover the whole loan. The depletion path discounts more, but you only need enough income to carry the payment and other debts.
Why a Fund Gets Cut but Cash Doesn’t
Cash holds its value. A mutual fund can drop 20% between the day the lender reads a statement and the day anyone would need to sell. The haircut is a cushion for that swing. It is not a fee, and it is not a forecast of your returns.
Retirement-held funds take a deeper cut on the depletion path. Withdrawals from those accounts carry a tax cost. The IRS treats distributions before age 59½ as early, with an additional 10% tax. The qualifier path reflects that age line directly: 90% under 59½, 100% after. The depletion path holds retirement balances at 70% regardless of age.
No federal rule sets any of these percentages. Federal ability-to-repay rules permit a lender to rely on assets other than the dwelling securing the loan, alone or alongside income. How much of each asset counts is the lender’s credit policy. That is why two programs can read the same statement and reach different numbers.
What Fund Type Does and Doesn’t Change
The program percentages above are published by account type, not by fund style. Equity funds, bond funds, balanced funds and index funds in a taxable account all sit in the securities bucket on the depletion path. Do not assume a conservative bond fund earns a better percentage than a stock fund.
A money market balance is different. It is a published asset class on the qualifier path at 100%. On the depletion path, the published categories are cash accounts, CDs, securities, private stock, retirement accounts and real-estate equity, so confirm with the lender how a money market fund will be classified before building a plan around it.
Some holdings are not on the list at all. Custodial accounts, deferred compensation, escrow accounts, foreign funds and non-vested restricted stock units are not eligible on the depletion path. Pledged or borrowed funds, and business accounts beyond your ownership share, 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.
Worked Example: A Mixed Portfolio
These figures are illustrative only. The lender’s own calculation governs.
Depletion path. Say a household holds $1,500,000 in securities and $300,000 in cash.
1. Securities at 80% count as $1,200,000.
2. Cash at 100% counts as $300,000.
3. Usable assets total $1,500,000.
4. Divided by 60 months, that is $25,000 of monthly qualifying income.
That income then carries the housing payment and other debts through the debt-to-income test. Funds needed for the transaction come out of the pool first, so a larger down payment reduces your own qualifying income. Lendmire’s explanation of how asset depletion income is calculated walks through the same subtraction.
Qualifier path. Say the loan is $800,000. The borrower holds $330,000 in brokerage accounts (100% = $330,000), $300,000 in a 401(k) under 59½ (90% = $270,000) and $200,000 in savings (100% = $200,000). That is $800,000 of usable assets, which equals the loan, so the file is reviewed on assets alone, subject to underwriting.
Same type of borrower, two paths, two different tests. One needs total assets to cover the loan. The other needs income to cover the payment.
Seasoning, Statements and the Stale-Statement Problem
Most preventable stalls on these files are paperwork, not math.
On the qualifier path, expect 60 days of seasoning and two months of statements for each qualifying account. On the depletion path, statements must be at least 120 days old at application, plus the most recent statement within 45 days. Sale-of-business, inheritance and legal-settlement funds are excused from that seasoning.
Both paths document the assets. Skipping income documents on the qualifier path never means skipping asset documents.
The usual friction points:
- Money moved between accounts mid-file, which can reset seasoning on the receiving account.
- A large recent deposit with no paper trail behind it.
- A statement set missing the pages that list holdings, so ownership and value can’t be read.
- Retirement balances quoted from memory instead of the statement.
- Market drops during review, which lower the balance the lender reads.
Pull full statements, every page, before the file starts. Don’t sell or rebalance mid-file without asking first.
Dividends, Fund Income and Double-Counting
The published program figures do not credit dividends or capital-gain distributions as separate income. The depletion method counts the balance, not the yield. The result is a calculated income figure, not a withdrawal plan, and nothing is sold or pledged.
If the fund also throws off income you want to document, ask the lender whether the same account can support both uses. Policy varies by lender, and the safe assumption is that a balance is used once.
Getting the Strongest Result
A few moves tend to help, none of them promises.
- Know your path first. Assets that cover the whole loan point to the qualifier path. A big pool but a smaller loan may favor depletion.
- Check where each fund is held. A taxable account and an IRA holding the same fund count differently on the qualifier path and on the depletion path.
- Watch 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, and never below $250,000 liquid when depletion is the only income source.
- Consider supplementing. Asset-derived income may add to documented income up to a 45% debt-to-income ratio, and then the minimum-assets rule is waived.
- Keep the credit file clean. The qualifier path has a 600 minimum score. The depletion path follows the lender’s matrix, and a first-time investor there needs 700.
For leverage, the qualifier path goes up to 80% on a purchase and 75% on a refinance. The depletion path goes up to 80% on a purchase or rate-and-term refinance and 60% on a cash-out refinance of a principal residence or second home. On an investment property, the depletion path allows up to 65% on a purchase or rate-and-term refinance and 60% on a cash-out. Cash-out proceeds never count as qualifying assets. Loans run to $4,000,000 on the qualifier path and $125,000 to $3,500,000 on the depletion path. Qualifier-path cash-out terms are set by the lender and are not published.
The Myths
“My $500,000 fund balance counts as $500,000.” On the depletion path it is cut first, then transaction needs come out, then it is divided by 60.
“The percentage is federal.” No. It is lender credit policy.
“I have to sell the funds.” No. The calculation is on paper.
“Asset depletion is the same as DSCR.” No. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Asset depletion qualifies a person on assets. For the rental side, see Lendmire’s complete DSCR loans guide.
“Home equity counts like a fund.” The dwelling securing the loan is excluded under the federal framework. Real-estate equity from other property is a separate category at 60% on the depletion path.
Tax treatment varies; consult a qualified tax professional.
Key Terms Defined
Haircut: the percentage cut to an asset’s balance before it counts, to cover market swings.
Divisor: the number of months the usable pool is spread over; 60 on the depletion path.
Seasoning: how long funds must sit in an account before they count.
Asset qualifier path: assets alone cover the whole loan, with no income documented.
Asset depletion path: usable assets become monthly income that runs through the debt-to-income test.
Frequently Asked Questions
Do mutual funds count at full value?
On the asset qualifier path, mutual funds held in a brokerage account count at 100%. On the asset depletion path, they count as securities at 80%. Both are subject to underwriting and the lender’s own calculation.
What about mutual funds inside an IRA or 401(k)?
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. The age line mirrors the IRS early-distribution rule.
Do I need to sell my funds to use them?
No. Nothing is sold or pledged. The balance is documented and counted, and the depletion result is a calculated income figure rather than a plan to withdraw.
Can this help me buy a rental?
The depletion path allows investment property at lower leverage: up to 65% on a purchase or rate-and-term refinance and 60% on a cash-out. Rental purchases that qualify on the property’s own rent usually go the DSCR route instead.
Does the same balance work on both paths?
You are qualified on one path at a time. A broker can run the statements against both to see which fit the loan, the property and your goals.
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 arranging financing through select lenders in its wholesale network. This is not a commitment to lend.
For anyone sitting on a fund-heavy portfolio, the first useful step is sorting balances by account type, because that sort moves the answer more than the fund’s name does.
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.
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References
1. IRS Topic 557, Tax on Early Distributions
2. CFPB Regulation Z, Ability-to-Repay Rule, §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: How Asset Depletion Income Is Calculated on a North Carolina Mortgage · Asset Depletion vs DSCR for a Georgia Rental Purchase · Can an HSA Balance Count Toward an Asset Qualifier Mortgage?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.