Asset depletion loan: how the income formula works
An asset depletion loan qualifies a borrower by converting eligible assets into a monthly income number. The lender adds the assets that count, applies haircuts, and divides by a term. That synthetic income is then run through DTI, credit, and LTV like any other file. This is a Non-QM documentation method. Agency underwriting does not do it.
Assets divided by months equals qualifying income
Example: $2,000,000 eligible assets divided by 240 months equals $8,333 per month. What changes by lender is everything inside eligible.
Every input to that formula is a lender rule
Asset depletion looks like arithmetic, but each term in the divide is a guideline choice. That is why the same statement produces different qualifying income at two lenders.
What counts: cash, stocks, bonds. Retirement accounts sometimes, sometimes not.
Retirement haircut: often a percent of vested balances, not 100 cents. Other asset types can take a discount before the divide.
Divisor: 240 months, 360 months, or another term the investor wrote. Whose assets: borrower only, or borrower and coborrower, with seasoning rules.
Typical requirements
A minimum asset size large enough to produce usable income after the divide. Credit and LTV floors like other Non-QM. Reserves that may or may not be allowed to double-count the depletion assets. Documentation: statements that prove the balances and seasoning.
Non-QM income documentation
1099 and P&L loans
Non-QM loan hub
Keep up with industry insights and LoanPASS updates.
Subscribe for updates, insights, and other great content.