When it comes to mortgages, every borrower has their Dallas individual needs. While some are willing to put down a decent down payment to enjoy lower monthly mortgage payments and better interest rates, others opt for a bank statement loan considering they can’t prove their regular income proof despite having substantial cash flow.
There is one more category of buyers who hold multiple liquid assets to showcase their financial stability to a Dallas mortgage company but do not have enough employment income to qualify for conventional mortgage options. For such borrowers, there’s a dedicated loan category called asset depletion loans which enables them to apply for a mortgage based on their liquid assets rather than their income.
If you haven’t heard of this loan type earlier and want to dive deeper into its ins and outs, this article will answer all your questions and more.
What is an Asset Depletion Mortgage?
At its core, an asset depletion mortgage is a type of loan that allows borrowers to use the value of their liquid assets to acquire a loan rather than their employment income. Even though such loans can be used by buyers with a conventional flow of incomes, these are mostly preferred by self-employed individuals and retirees who want to buy their own homes using liquid assets, such as bonds, stocks, and savings accounts.
Because borrowers do not have to showcase their income proof, they’re not required to submit their tax returns when applying for this type of mortgage.
How Asset Depletion Mortgages Work?
For mortgage lenders, your income usually acts as a benchmark that helps them decide whether you qualify for a particular type of mortgage. However, in many cases, borrowers are actually able to afford a loan even if they don’t receive a regular paycheck from an employer.
For example, retirees, self-employed individuals, and gig workers usually have tons of money rolled into liquid assets but practically no income stream to document and present as proof to their lenders. In these situations, an asset depletion mortgage paves the way for you to invest in your desired property following a streamlined and legal mortgage route.
In order to qualify, you’ll first have to find a Dallas mortgage company or a lender who offers this type of loan. The next step is to provide your lender with all the required documentation stating the types of assets you have and their actual worth. Remember, not all types of assets fall under the category of liquid assets (we’re going to list down eligible ones in one of the following sections of this article).
Who Can Benefit from Asset Depletion Loans?
As discussed above, borrowers with liquid assets but no verifiable income can apply for asset depletion loans in Texas. This mortgage can be an ideal option if you’re a retiree or a self-employed worker with sufficient finances in the form of liquid assets but no verifiable income proof.
You may also qualify for an asset depletion mortgage if you have no intentions of working regular hours and keeping your route freelance/remote.
The best thing about asset depletion loans is they don’t require a borrower to have a minimum or maximum worth of assets. Anyone can apply for this loan without feeling hemmed into certain amounts.
Eligible Assets
Not all assets will qualify for your asset depletion mortgage application. As a general rule, a qualifying asset should be liquid in nature. For those unaware, liquid assets are those assets that can be easily converted into cash within a span of 30 days or a lesser time period. These typically include:
- Stocks
- Checking/saving accounts
- CDs
- Retirement accounts
- Bonds
- Money market accounts
Here it is essential to understand that lenders won’t necessarily consider the entire amount of eligible assets. For example, your lender may only consider 70% of your holdings in the case of investment assets. Similarly, not more than 70% of funds will be considered when you apply on the basis of your retirement account. You may, however, expect 100% valuation when applying with your savings accounts.
Requirements for an Asset Depletion Mortgage
In order to qualify for an asset Depletion mortgage, a borrower may have to fulfill the below-given criteria:
- Make sure you have at least twice the required loan amount as assets.
- Enough reserves to pay 25% to 30% down payment.
- Asset depletion loans can be used to purchase a single-family home, 2-3 family dwellings, or condos.
- A powerful and convincing credit history
What are the Pros and Cons of Using an Asset Depletion Mortgage?
Pros:
- The biggest advantage of an asset depletion mortgage is it allows retirees and self-employed individuals to apply for a mortgage without income
- Multiple property types are supported
- Multiple asset types supported
Cons:
- Larger down payment requirements
- Requires excellent credit history
- 50% or less DTI requirements
Is Asset Depletion Mortgage Right for You?
If you’re having difficulty finding the right mortgage option with no income stream, an asset mortgage deposit can be your best option. The only thing you will need to have is enough qualifying liquid assets that you can show your lender to prove your financial stability.
Finding the Best Dallas Mortgage Company for Asset Depletion Mortgages
When you apply for an asset depletion mortgage, the next step is to find a lender with this program on their list of options. Because not all lenders offer this service, you may have to shop around and look for a reliable mortgage company with this loan category available for borrowers.
You may also contact portfolio lenders and large banks offering customer asset-depletion mortgages. The terms and conditions vary by lender, meaning you must research and compare different options before making a final decision.
Remember, your rate will significantly impact your monthly mortgage installments. A little homework beforehand will save you a lot of money over the years on your long-term asset depletion loan.
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