What an Asset Depletion Loan Counts as Qualifying Income

Asset depletion, sometimes called asset dissipation or asset-based qualifying, takes eligible liquid assets you already own and converts them into a monthly income figure on paper. The underwriter divides a qualifying portion of those assets across a set number of months and treats the result as income for the debt-to-income calculation. No account is drained, pledged, or touched. It is an arithmetic method, not a withdrawal.

The key idea is that a lender is trying to answer one question: is there a durable capacity to make this obligation. Wages are the usual proof. Assets can answer the same question, and this method gives the underwriter a defensible way to write that answer down.

Because it is a calculation rather than a product feature, the same borrower profile often gets evaluated with and without it. Some files qualify comfortably on documented income alone and never need it. Others need it to close the gap on paper only.

Generally, the assets that count are liquid or near-liquid and fully available to you: checking and savings, money market accounts, brokerage accounts holding stocks, bonds, and mutual funds, and certificates of deposit. Retirement accounts often count as well, though usually at a reduced percentage and sometimes only if you have reached the age where you can access them without penalty.

What usually does not count is anything you cannot readily reach or cannot value cleanly. Real estate equity in other property, business operating accounts you do not solely own, restricted or unvested stock, and funds already committed to the transaction itself are common exclusions.

Lenders also apply a haircut to volatile holdings, discounting a brokerage balance below its statement value to account for market movement. The exact percentages and the number of months used in the division vary by lender and program, which is why two lenders can look at identical statements and produce different qualifying figures.

This method exists for borrowers whose net worth outpaces their reportable income. Retirees living off portfolio distributions, business owners whose tax returns show aggressive but legitimate write-downs, people between liquidity events, and borrowers who took a step back from full-time work while their assets kept working are the typical profiles.

What these situations share is margin. Asset depletion is not a workaround for a thin file or a way to stretch into a payment that does not fit. It is a translation tool for someone who already has the capacity and simply cannot express it through conventional documentation.

It often comes up on a cash-out refinance, where the reason for the loan is already tied to the balance sheet: consolidating other obligations, funding a project, or repositioning equity that has built up over years of ownership.

On a cash-out refinance, the equity in your home and the assets in your accounts are being read together. Underwriting looks at the loan-to-value on the property, then separately at whether qualifying capacity supports the new obligation. Asset depletion addresses the second question, not the first.

One detail catches people off guard: if you are using cash-out proceeds to add to your liquid accounts, those proceeds generally cannot be counted as qualifying assets in the same transaction. The math has to stand on what you had going in.

Reserve requirements are also usually separate. A lender may want to see assets remaining after closing beyond whatever was used in the depletion calculation, so the same dollar cannot always do two jobs. Worth mapping out before you decide how much cash-out to request. You can review general product categories on our loan options page.

Ask what divisor a given lender uses, because that single number moves the qualifying income figure more than anything else. Ask what discount is applied to retirement and brokerage balances, and whether your age changes the treatment of retirement funds.

Ask how many months of statements are required and whether large deposits will need to be sourced. Portfolio accounts move; underwriters ask questions about movement they cannot explain, and having documentation ready shortens the process considerably.

Finally, ask whether the file could qualify without asset depletion at all. Sometimes documented distributions, rental income, or a longer income-averaging window get you there with less scrutiny. Knowing both paths before you commit to one is the point.