Let your retirement and savings accounts help you get a loan
The non-QM lending space has provided alternative choices for borrowers who fail to meet the stringent criteria of traditional mortgages. Among the fascinating new offerings is the asset utilization mortgage, which enables borrowers to qualify based on their liquid assets instead of their income. For individuals with significant assets but limited or even no income, an asset utilization mortgage presents a suitable solution. Let's dive deeper into the benefits of this non-QM loan and explore strategies to position oneself as an ideal borrower.
Concerned about being turned down due to high debt ratios?
With the asset utilization (depletion) mortgage used in combination with your current income it may help you qualify for a mortgage. One option of using this mortgsge is to combine it with your regular income when your debt to income ratios disqualify you using traditional lending guidelines. See the chart below to see how it works.
Unemployed with large savings or investment accounts?
This loan allows applicants to use their liquid assets (savings, CD, retirement, and stock brokerage accounts) to qualify. The lender simply divides your qualifying assets by 48, 60, or 84 months depending on the loan product. Qualifying assets and percentages used vary based on if your age being above 59.5 yrs or below.
Loan highlights
This non-qm asset-based loan is specifically made for people with high net-worth yet have income from their investments or other sources that don't qualify under the bank statement mortgage profit & loss statement loan.
- - No tax returns or transcripts required
- - No personal income and no job necessary
- - Your assets stay in your name. No pledging required
| 30-year Fixed Loan Type | Conventional | Asset Utilization A | Asset Utilization B | |||
|---|---|---|---|---|---|---|
| The loan scenario above is for a borrower with a 740 or higher credit score financing an owner-occupied detached home using their qualifying assets. A debt to income (DTI) ratio over 50 would make the loan not acceptable while a DTI below 50% is acceptable. Not all applicants will qualify. Asset Utilization "A" (borrower has $500,000 in qualifying assets and job income. when combined added income is capped at 12% over job income) Asset Utilization "B" (borrower has $1,000,000 in qualifying assets and retired) |
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| Purchase Price: | $1,200,000 | $1,200,000 | $1,200,000 | |||
| Down Payment: | $240,000 | $240,000 | $240,000 | |||
| Loan amount: | $960,000 | $960,000 | $960,000 | |||
| Monthly Income: | $12,000 | $13,440 | $16,666 | |||
| Debt ratios: | 50.7% | 48% | 42.8% | |||
Who does an Asset Utilization Mortgage Help?
With large savings or investment accounts you may be the ideal borrower most helped. See below. Learn more about other alternative income Non-Qm loans.
You may still be approved if you are:
- - Retiree
- - Entrepreneur
- - Day trader
- - Trust Beneficiariary
- - Fix and flipper
- - F/T or P/T worker and need more income
- - Unemployed or had a period of low income
Pros & Cons of Asset-based lending
Benefits
- No Tax Returns. In contrast to conventional loans, this loan product gives borrowers the option of qualifying with their job income or without. Borrowers with substantial savings tend to choose this method because they don't need their job's income to qualify.
- No employment verification. This option works similarly to no 1040 returns and helps you close the loan much quicker if you can qualify without employment.
Drawbacks
- High down payment. While conforming loans allow 5-percent down payment and a jumbo loan 10-15 percent down payment, the asset-utilization loan requires a minimum of 20-25 percent depending on the loan product.
- Interest rate. The interest rate is higher by approx. .75 to 1.75% than conforming rates depending on the borrower's credit score and LTV.
FAQs
See answers to questions borrowers also ask about this low doc loan
Does the lender want to hold, retitle, or be added to my accounts?
No. The lender will not change anything on your accounts. They will only verify you've owned these funds for the last 60 or 90 days.
How are my qualifying assets calculated?
If you are under age 59.5 at the time you apply for a loan, the underwriter will allow you 60-70% of assets held in retirement accounts. If the liquid assets are held in a regular brokerage account they will allow either 70 or 100% of the assets as it depends on the loan program. If the assets are held in a CD, savings, or regular bank account you will be credited for 100% of the account value.
How many months of liquid reserves do I need?
The amount needed is generally 3- to 6-months separate subtracted from your qualifying assets value.
What credit score do I need to qualify for an asset based loan?
The minimum FICO credit score requirement is 640. If you want the best interest rate try to get your middle credit score above 760.
What is the required down payment?
Financing is available up to 75-percent of the appraised value to $1 million and 70-percent to $2 million. So a minimum 25-percent down payment is required for most loans.
What if my IRA is in annual distribution status?
The underwriter will determine the account balance minus your annual distributions and use the qualifying assets to calculate your income.
1. View the disclosure disclaimer regarding loan approval, loan product availability and qualifying for a loan. Not All borrowers will qualify.