Asset Depletion Loans Florida

Asset Depletion Loan Requirements in Florida

An asset depletion loan qualifies you on what you have rather than what you earn. The lender takes your eligible savings and investments, applies a discount, divides the result over a set number of months, and treats that monthly figure as income. No employment, no pay stubs and no rental income are required for the calculation to work.

For the official rules behind this, review the CFPB's Owning a Home guide.

How Savings Become Qualifying Income

The mechanics are simple arithmetic, and understanding them is most of what you need. A lender starts with the accounts it is willing to count, reduces each by a discount that reflects how liquid and how certain it is, adds the survivors together, then divides by a number of months. The answer is your qualifying income for the file.

Nothing is actually withdrawn. You are not required to liquidate anything, to set up a distribution, or to show that the money is being spent. The depletion is a calculation rather than an event, and the accounts stay where they are. Borrowers often assume otherwise and hesitate for no reason.

That calculation is the whole loan, which makes the divisor the single most consequential term. The same portfolio divided over sixty months produces double the qualifying income it produces over a hundred and twenty. Two lenders looking at identical assets can therefore reach very different conclusions about what you can borrow, and neither is wrong.

Because of that, this is a product where shopping genuinely changes the outcome rather than just the rate. The first question to ask any lender is not what rate they offer but what divisor they use and which accounts they will count. Those two answers determine whether the loan is large enough to be useful.

Divisors, eligible account types and discount rates are set by each lender rather than by agency guidelines, and they vary widely. Nothing here is a formula any particular lender uses.

Which Accounts a Lender Will Count

Not every asset counts, and the ones that do are rarely counted at face value. The pattern behind the discounts is consistency: the more liquid and the more certain an account is, the more of it survives into the calculation.

Cash and cash equivalents in bank accounts are the cleanest. They are liquid, their value is not in question, and lenders typically count them at or near full value. Taxable brokerage holdings come next, discounted because their value moves with the market and selling has consequences.

Retirement accounts are where the treatment gets more complicated, and where your age matters. Where you have reached the age at which funds can be withdrawn without an early distribution penalty, a lender will usually count a meaningful share. Where you have not, expect a heavier discount or exclusion, because the money is not genuinely available to you yet.

Several asset classes are commonly excluded outright. Equity in your home does not count, since you cannot spend it while living there. Business assets usually do not, because they belong to the business rather than to you. Nor do accounts you do not control, or funds that are already pledged as collateral somewhere else.

One practical point that catches people out: assets held jointly with someone who is not on the loan are treated inconsistently between lenders. If a substantial account is in joint names, raise it early rather than assuming it will be counted.

What the Formula Actually Produces

It is worth walking the arithmetic once, because the result is usually smaller than borrowers expect and it is better to learn that before you are under contract.

Take a portfolio of a million dollars, split between a taxable brokerage account and a retirement account. After the lender applies its discounts, perhaps seven hundred thousand survives into the calculation. Divided over a hundred and twenty months, that is roughly five thousand eight hundred a month in qualifying income. Divided over sixty months, it is more than eleven thousand.

Then remember that qualifying income is not the loan amount. It feeds a debt-to-income calculation alongside everything else you owe, and the housing payment that income can support includes taxes and insurance, not just principal and interest. In Florida that distinction is sharper than elsewhere, because insurance and property tax occupy a larger share of the payment here than in most states.

So a seven-figure portfolio does not automatically produce a seven-figure loan. Run the numbers with a broker before you shop, using the specific divisor and discounts a given lender applies, and include a realistic Florida insurance quote in the payment rather than a placeholder.

Where the answer falls short, there are usually two levers. A larger down payment reduces the payment the income has to support. And a lender with a shorter divisor or lighter discounts may reach a different answer on the same assets, which is why comparing more than one is not optional on this product.

The figures above are an illustration of the arithmetic, not a quote and not a representation of any lender terms. Actual discounts, divisors and ratios differ by programme.

What Else the Lender Expects

Asset depletion loans sit outside agency guidelines, which means they are portfolio or non-QM products held by the lender rather than sold. The terms are therefore set in house, and they are firmer than a conventional loan because the lender is keeping the risk.

Credit expectations are higher than on a conventional file. These are not products designed for credit repair, and a thin or damaged profile will be difficult regardless of how large the portfolio is. The assets answer the income question, not the willingness-to-pay question.

Down payment is larger too, and that is partly structural. A lower loan amount relative to value reduces the payment the calculated income has to cover, so a bigger deposit does double work on this product: it satisfies the lender equity requirement and it makes the qualifying arithmetic easier at the same time.

Then documentation, which is the part borrowers underestimate. You will provide statements for every account being counted, usually covering several months, and the lender will want to see that the balances are seasoned rather than freshly arrived. A large recent deposit will be questioned and may be excluded, so move money into position well before you apply rather than during underwriting.

Expect the lender to want the assets to remain in place through closing as well. Depleting the accounts you qualified on, between approval and funding, is the fastest way to lose a clear-to-close on this product.

When This Is the Right Product

The clearest case is a retiree with substantial savings and little reported income. Social security and a modest pension will not support a large mortgage on a traditional calculation, while the portfolio sitting behind them easily would. Asset depletion is the structure built for exactly that mismatch.

The second case is someone approaching retirement who has left employment but not yet started drawing income. On paper they look unemployed. In practice they are funded. A conventional lender cannot bridge that gap and an asset depletion lender can.

A third group is people whose income is real but awkward to document: equity holders whose compensation arrives irregularly, beneficiaries of a trust, or anyone whose tax returns understate their actual position by design. Where there are assets, this product avoids the argument about the returns entirely.

It suits a Florida buyer more often than it suits buyers in most states, for a simple demographic reason. This is a retirement destination, and a large share of purchases here are made by people who have stopped earning and started spending down. Second-home and seasonal buyers fall into the same pattern.

Where it does not fit is the borrower with a strong documented income, who should simply take a conventional loan and the better pricing that comes with it. Asset depletion costs more than a conventional mortgage. It is a solution to a documentation problem, not a cheaper way to borrow.

Other Routes Worth Pricing First

Before committing to an asset depletion loan, it is worth testing whether a cheaper structure reaches the same answer, because several sometimes do.

Conventional lenders can in some circumstances use retirement assets to support qualifying income under agency rules, and where that works the pricing is better than any non-QM product. It is narrower than asset depletion and the guidelines are specific, but it costs nothing to ask whether your file fits.

Where the property will be let rather than occupied, a DSCR loan qualifies on the rent the property produces instead of on you at all. For an investment purchase that is frequently the simpler and cheaper route, and it leaves your portfolio out of the conversation.

A bank statement loan works where there is actual cash flow moving through accounts, even if the tax returns do not show it. That suits a self-employed buyer better than a retiree, but the two products are often confused, and the one that fits depends on whether you have deposits or balances.

And for a buyer with a very large portfolio relative to the purchase, a securities-backed line from the institution holding the assets is sometimes cheaper than a mortgage, though it carries its own risks if markets move. Worth comparing rather than assuming a mortgage is the only route.

Which structure is cheapest depends on the property, the use and the file. Asset depletion is a solution to a documentation problem and prices accordingly, so it is worth confirming a conventional route is genuinely unavailable first.

Asset Depletion Loan Requirements: FAQ