Other borrowers who need to show more income or who have difficulty proving their incomeĪsset depletion is an additional tool to help you qualify more easily for a mortgage.Self-employed borrowers whose taxes show less income than what’s available to pay their mortgage.Applicants who are retired and living off of their savings (perhaps in addition to social security and/or pension income).Types of Borrowers Who Benefit From Asset Depletion Mortgages?Īsset depletion mortgages can help anyone with income challenges qualify for a mortgage. In addition, you must meet all other Freddie Mac underwriting guidelines- for example, credit score minimums and maximum debt-to-income ratios. The property must be a 1- to 2-unit primary residence or second home - no rentals. You cannot use asset depletion for cash-out refinancing. Your maximum loan is 80% of the property value.
Not everyone is eligible for an asset depletion loan under Freddie Mac. Am I Eligible for Freddie Mac Asset Depletion? But now you get to add $875 per month to your qualifying income because you’re dividing by 240 instead of 360. Under the new guidelines, you’d still be able to deplete $210,000 of $300,000 in savings. The end result may be used as a qualifying monthly income. The new rule per Freddie Mac Asset Depletion: A borrower may use 70% of the balance of an investment account and divide that number by 240 months. How Does Freddie Mac Asset Depletion Work?
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We will detail how to use your assets as qualifying income and go over the changes put in place by Freddie Mac. In this article, we will discuss Freddie Mac Asset Depletion Guidelines. Last year, however, Freddie Mac revised its guidelines, and they are a lot more generous. Divide that amount by 360 months for a 30-year loan and you get to add $583 per month to your qualifying income. Suppose that you have $300,000 in stocks and bonds. The exact percentage depends on the type of account - typically, you can use 70% of stocks and bonds, 60% of retirement funds, and 100% of cash in a savings account. How Are Assets Used For Determining Ability To Repay on Asset-Depletion Mortgages? The typical way for mortgage lenders to calculate asset depletion income is to take some percentage of your savings, investment, or retirement account, divide it by the number of months in your loan term (360 months for a 30-year mortgage), and add that amount to your qualifying income. For instance, when you retire, you might not be earning income, but you can continue to live normally because you use your savings to pay your mortgage and other costs.
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