Over the years of working in the mortgage world, I have come across unique situations that require more thinking involved to help clients with needs regarding home purchases. Everyone is different and the title of this is a great example that sometimes, people have assets, but might not have income to qualify. We have a special opportunity at Mountain Lake Mortgage to use what is called Asset Depletion for maybe self-employed borrowers, less than a year of being in their business, or it might even be for people in retirement. It could be other situations, as well, but those are just a couple that we see quite often that benefit this product and let me explain why.
What are assets that we can use to calculate this? Great question that most people ask and what we can use are publicly traded stocks, bonds, mutual funds, vested amount of retirement accounts and depository bank accounts, to name several, but isn’t an exhaustive list. If the portion of the Qualified Assets are being used for the down payment and/or closing costs, plus reserves, those amounts must be excluded from the balance before analyzing the portfolio for income determination. There are some caveats to this lending regarding loan to value of the purchase, credit history and mortgage history, as well, but is a great option for people who fit this scenario. Here is a break down of the funds that can be used and the percentages we can use to calculate the income:
- 100% of checking, savings and money market accounts can be used in calculating asset income
- 80% of stocks and bonds can be utilized in calculating asset income
- 70% of retirement can be used in calculating asset income
- Revocable Trust accounts are subject to a review and are accepted on case by case approval. Typically, must be a sole beneficiary and sole trustee in most cases.
The calculation that we use is typically Net Qualified Assets/60 months = Monthly Income
These scenarios can vary per lender, and some are more advantageous than others. Know, though, we can search our lenders for you to find the best product possible as a broker.
Please reach out for your scenario and I’d be happy to qualify you for a new home purchase today!
