Asset-Based / Asset Depletion Loans
Asset depletion loans are becoming more and more popular, but what are they? Asset Depletion Mortgage Loans are a particular type of loan that allows you to use the equity in your assets to qualify for a loan. So let’s take a closer look here.
Contrary to popular belief, not all potential homeowners follow the same path concerning funding their home loans. Sometimes, their income can come from non-traditional sources, such as being self-employed or retired. In some cases, the majority of a person’s actual savings can be in the assets they own rather than in their job income. If lenders looked at job income alone, these people wouldn’t qualify for a home loan. Still, the value of their assets could be plenty to assure the lender that they are not a risk. This is why an asset depletion mortgage, also known as an asset-based loan, exists.
Asset-based mortgage loans are typically available at a lower interest rate than other types of loans, making them an attractive option for borrowers who are looking to save money on their monthly payments. Of course, asset depletion mortgage loans are not suitable for every borrower, but they can be a great option for those who have a lot of equity in their home and are looking to access that equity without selling their home.
How Does an Asset Depletion Loan Work?
Asset depletion mortgage loans are a type of loan that allows homeowners to use the value of their assets instead of their income to qualify for a loan. This can be a beneficial option for retirees or individuals with significant assets but little Income.
Rather than using your Income from employment, you can use an asset-based loan to qualify for a mortgage, provided you have substantial assets. In this case, your monthly income is calculated by dividing total liquid assets by 360 months (30 years, the length of most mortgages). Using funds from your assets means you don’t have to show Income from any other source, including employment. So long as you have enough assets to pay for the loan and regular living expenses, you can qualify.
Asset Depletion Mortgage Loans typically have a higher interest rate than traditional loans, but they can be a good option for borrowers who might not otherwise qualify for a loan.
Do I Need to Cash In My Assets to Get Approved?
If you’re considering an asset-based mortgage, you may be wondering if you need to cash in your assets to get approved. The answer is no – you don’t need to liquidate any of your assets in order to qualify for this type of loan. This is because asset depletion loans are based on the value of your total assets, not just the liquid assets.
Think of it as an alternative to conventional home loan funding, but rather than look at your W2s or pay stubs, the lender looks at your liquid assets as your loan collateral.
What Types of Assets Can Help Me Qualify?
Only certain types of assets will help you qualify for an asset depletion loan. These generally include your checking or savings accounts, money market accounts, CD (certificate of deposit) accounts and so on. Certain types of retirement accounts can also qualify, like a 401(k) or an IRA. In addition, certain types of investment accounts like mutual funds, stocks and bonds may also qualify.
Asset Depletion Loan Features:
- Min FICO 680
- Loan amount up to 3M
- Max cash out $1.5M
- Income qualification based on verified liquid assets
- 15 & 30 year fixed; 5/1, 7/1, 10/1 ARMS
- Employment and Income are not required to be disclosed on the 1003
- Full asset documentation required for funds to close, reserves and qualifying asset requirements
- Assets can be cash in the bank, stocks, bonds, IRAs, 401ks, mutual funds or retirement accounts
- Asset levels in the verified accounts are expected to be consistent and sustained
How Do I Apply for an Asset-Based Loan?
It’s important to note that these are just the basics for understanding how this type of alternative funding works and why it may be a good avenue for your unique borrowing needs. In addition, there are specific requirements, and only a certain percentage of your assets are counted. For this reason, it’s important to choose a lender that has experience with an asset depletion mortgage to help you better understand these requirements, regulations, and other steps you’ll need to follow in order to get qualified and approved.
If you’re interested in applying for an asset depletion loan, here’s how to do it:
- Contact a lender that offers this type of financing: The first step is to speak with your lender about whether or not they offer asset depletion loans. Not all lenders offer this type of loan, so it’s essential to find out if they do before you begin the application process.
- Gather your documentation: Once you’ve found a lender that offers asset depletion loans, you’ll need to gather the necessary documentation. This will include things like your most recent tax return and a statement of your assets.
- Complete the application: The next step is to complete the loan application. This will include providing information about your income, debts, and assets.
- Get approved: Once you’ve submitted your application, the lender will review it and make a decision. If you’re approved, you’ll receive the loan disbursement according to the terms of your loan agreement.
Keep in mind that the application process can take several weeks, so it’s important to start the process early if you’re hoping to purchase a home in the near future.
Apply for Asset Depletion Loan Today!
LBC Mortgage has a great deal of experience in alternative funding for home loans, including asset depletion loans. Contact us today to learn more about this unique form of financing, and we’ll take the time to answer any questions you may have, as well as work with you to help you get the best possible rates should this be a loan that you’d be interested in pursuing.
Our helpful, friendly home loan experts are ready to serve and work hard to get you the best deal by taking the time to understand your unique situation.