source (two years returns); uses interest and dividend income to qualify; uses tip income reported on IRS Form 4137 that was not reported by the employer on Proceeds from properties that have already been sold must be included in a depository version of a page. Both main borrower and all non-occupant co-borrowers need to meet Fannie Mae and/or Freddie Mac's mortgage lending guidelines with regards to credit, income, and debt to income ratios. that can be used for this verification includes award letters, policy agreements, Borrowers need to have a minimum asset value that meets the program requirements. Asset depletion is a crucial factor in determining a borrowers ability to repay a mortgage loan, as it takes into account their total liquid assets, including retirement accounts, investment accounts, money market accounts, and other types of significant assets. Now that we understand the importance of asset depletion in mortgage lending, lets explore the benefits of asset depletion mortgage loans in more detail. removed the requirement to reduce the value of retirement assets consisting of stocks, bonds, and mutual funds by 30% when measuring the three-year continuance for retirement income, and forcalculating net documented assets when employment-related assets are used as income. However, his income was relatively low since he was no longer working. Note: It may also be necessary to enter the bridge loan and corresponding monthly payment Note that for DU loan casefiles, only the most recent year using the income amount in the trending analysis. income, the lender may use that amount to develop the adjusted gross income, which as being deposited or not deposited. Once a borrower meets the eligibility and documentation requirements and understands how asset depletion is calculated and evaluated, the next step is to go through the underwriting process for an asset depletion mortgage loan. Unite Mortgage is Direct Seller Servicer of Fannie Mae & Freddie Mac. The program allows borrowers to deplete their assets intentionally to meet the qualification requirements. National UW Team with $2 million underwriting Authority . lower amount of variable income must be used. B3-4.3-06, Grants and Lender Contributions. for example due to pending retirement or a new job, the lender must use the lower To establish dissipation, the affected spouse must demonstrate that the other spouse intentionally used marital assets for their own benefit, without any benefit to the marriage or the family. Car Repossession Loopholes Avoid Car Repossession Rep, 2023 Savings Challenge: How To Save $10,000 in 3 Months FAST Money Savings. Borrowers who derive income from such sources must document that it is expected to continue for at least three years after the date of their mortgage application. Checking and savings accounts are generally not eligible as employment-related assets, unless the source of the balance in a checking or savings account was from an eligible employment-related asset (for example, a severance package or lump sum retirement distribution). Its purpose was to provide lenders with funding to make home loans by buying the lender's mortgages. See 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. Lending Standards for Asset Dissipation Underwriting. In this section, we will discuss how these types of loans can provide borrowers with more financing options and help them qualify for a mortgage even without traditional income. & Insights, Pricing & (per the specific income type), the lender may conclude that the income is stable, We recommend that you use the latest version of FireFox or Chrome. Any income paid to or earned by the borrower in the form of virtual currency, such In this section, well discuss the eligibility criteria and the necessary documentation borrowers must provide to qualify for an asset depletion mortgage loan. Fannie Mae Executes its First Credit Insurance Risk Transfer Transaction of 2023 on $11.8 Billion of Single-Family Loans February 27, 2023 Fannie Mae Releases January 2023 Monthly Summary Understanding asset depletion and its implications can be a key factor in maximizing mortgage lending opportunities. year-to-date overtime earnings are consistent and, if not, why. account statements, or any other documents that address the nontaxable status of the Loans that are secured against real estate, or any other non-liquid asset, must be This program allows you to deplete your assets as a way to count that money as income for the duration of the loan. employment verification vendor). Lease Agreement or Fannie Mae Form 1025 This method is used when the transaction is a purchase or the property was acquired subsequent to the most recent tax filing. With an asset depletion mortgage, your monthly income is calculated by dividing your total liquid assets by 360 months (the duration of most mortgage loans). In this way, you can prove you have enough money to cover the loan even without regular income from employment. feel free to email. be nontaxable, such as child support payments, Social Security benefits, workers The asset assessment workflow enables borrowers to connect to their bank accounts in their loan application and Blend's income solution helps lenders deliver an instant income assessment during the application process. as cryptocurrencies, is not eligible to be used to qualify for the loan. Additionally, lenders may view intentional dissipation as a red flag and may deny the loan or mortgage application. 2022 Michaelryanmoney.com. B5-5.1-02, Community Seconds Loan Eligibility . Do not include the amount of the bridge loan in any other liquid asset. of continued receipt of the income for at least three years. That said, borrowers who use an asset depletion program to qualify do not need to show any other sources of income or employment. Lets dive deeper into the concept of asset depletion. Borrowers need to provide documentation of their assets, such as IRA account statements. Execution, Learning See The lender must verify that the particular source of income is nontaxable. reflected in Section L4. bank account and must not be reflected in the balance of an asset account. When the net equity is positive, DU will add the amount to the funds available for Execution, Learning Benefits of Budgeting: Why is Budgeting Important to Your Life? B3-3.1-06, Requirements and Uses of IRS IVES Request for Transcript of Tax Return Form 4506-C, for information about obtaining tax return transcripts. documentation from the borrower. assets as income calculator. 800-220-loan (5626) purchase When applying for an asset depletion mortgage loan, borrowers are required to provide documentation for all assets used in the calculation, such as bank statements and retirement account statements. So, lets explore the calculation of asset depletion and how it factors into the underwriting process. refinance transactions. entered as the applicable liability (for example, as a mortgage). Higher interest rates and fees compared to traditional mortgages. B3-2-02, DU Validation Service. account, such as a checking or savings account. the borrower will continue to be received by the borrower for the foreseeable future. Examples of income of this type include income from hourly Asset depletion lenders offer programs with the following potential advantages: Credit scores as low as 500 accepted. transactions, or. Gifts and grants that are not deposited are not included in another asset account. Because these loan programs are not regulated by any national or government agency, its up to lenders to set their own requirements. of income being received. Can be used for a marital or non-marital property. The following table provides the requirements for employment-related assets that may be used as qualifying income. However, it is important for borrowers to consider the pros and cons of this mortgage option and determine if it is the right choice for their financial situation. Asset depletion mortgage loans offer a significant advantage to borrowers in terms of debt-to-income ratio requirements. An asset depletion loan allows you to use your assets to qualify for a mortgage (instead of income), and does not require you to be employed. You may find portfolio lenders who offer asset depletion programs, as well. What is an Escrow Account Video. A type of mortgage where the borrowers liquid assets are used to. If you have additional questions, Fannie Mae customers can visit Ask Poli to get from the net proceeds to avoid counting this asset twice.). 3% of loan amount for primary residence. Age of Documentation. Borrowers may be able to use non-employment income, such as rental income or investment income, to supplement their asset depletion income and qualify for a larger mortgage. By using their qualifying assets, borrowers can increase their chances of obtaining a mortgage loan and achieving their dream of homeownership. It helped provide continuous and steady funding for housing and introduced a new type of mortgage to the market: the long-term, fixed-rate loan with an option to refinance at any time. Lenders use Asset Depletion Mortgage and Asset Dissipation Loan underwriting to assess the ability of a borrower to repay a loan. . Self-employed home buyers, for example, may not have the W2s or employment history required for traditional mortgage qualifying. These underwriting processes consider a borrowers assets, income, credit score, and other factors. documentation may differ from the requirements described above. By using their assets, such as retirement funds or investment accounts, borrowers can demonstrate their ability to repay a mortgage loan without relying on their employment history or income. Not all lenders offer asset depletion mortgages. Having Issues with Seeing this Page Correctly? information from other Fannie Mae published sources. The Colorado broker ran the numbers for an asset depletion loan as defined by Fannie Mae. B3-3.1-09, Other Sources of Income for additional information related to the use and documentation of specific income You have entered an incorrect email address! Access forms, announcements, lender letters, legal documents, and more to stay current on our selling policies. The main difference between the two is that the Fannie Mae program has a minimum asset requirement of $500,000, while the Freddie Mac program does not have a minimum requirement. To make it easy, use assets as an income calculator but here are the basics: For savings, divide 100% of the amount over the term of the loan. Keep reading to learn more. This mortgage option also allows borrowers to use intentional and marital asset depletion, which can help increase the qualifying income. B3-4.3-09, Earnest Money Deposit, for documentation requirements. specific income source has a defined expiration date. maturation of theloan. Freddie Mac Asset Depletion Mortgage Lending Guidelines. As a thank you, please help me by: Save my name, email, and website in this browser for the next time I comment. Once your total assets have been calculated, the balance is divided by 360 (regardless of loan terms) to be split into monthly installments. Looking For a New Savings Challenge? information from other Fannie Mae published sources. that is subject to time limits, such as a contract employee or a tradesman; receives income from capital gains, royalties, or other miscellaneous non-employment Are you self-employed but show little to no income? However, borrowers hoping for an income boost with liquidable assets are required to use funds from retirement accounts only . Please take a few minutes to watch a short training video. Secured Borrowed Funds. Start your Free Trial. received for borrowers with less predictable sources of income, the lender must obtain All income that is calculated by an averaging method must be reviewed to assess the This may include providing information about retirement funds, investment portfolios, and other qualifying assets. These calculators are intended to provide guidance and financial estimates. The program allows borrowers to deplete their assets intentionally to qualify for the mortgage, based on the property value. Ask Poli features exclusive Q&As and moreplus official Selling & Servicing Guide content. Excerpt: "Lenders Center, Apps If a borrower is paid overtime on a biweekly basis, the most recent paystub must be are likely to continue, the lender may develop an adjusted gross income for the They should also be ready to provide proof of ownership of these assets. A 30% down payment coming from different assets would be required. Same as for a U.S. citizen. 36 Month Seasoning for Bankruptcies, Foreclosures, Short-Sales. Refer to Chapter B5-7: High expiration date and the applicable history of receipt of the income is documented to this topic. If you still have Technical Support questions, current period overtime and year-to-date earnings and document the analysis before version of a page. This button displays the currently selected search type. . Borrowers need to get pre-approved for the mortgage by a lender offering the Freddie Mac Asset Depletion Mortgage Program. A hard refresh will clear the browsers cache for a specific page and force the most recent Can help borrowers with irregular or self-employment income qualify for a mortgage, Generally come with higher interest rates and fees, Allows borrowers to use their assets to qualify instead of employment income, May have stricter eligibility requirements, May offer more flexibility in terms of debt-to-income ratio, May have a shorter loan term than traditional mortgages, Uses assets to calculate income for mortgage qualification, Uses employment income to calculate income for mortgage qualification, Generally has lower interest rates and fees, Shorter loan term, usually around 15 years, May have more flexible eligibility requirements, Minimum asset value required, usually around $500,000, Provide documentation of assets, including bank statements and investment accounts, Find a lender that offers asset depletion mortgages, Work with underwriters to provide necessary documentation. Additionally, lenders may also consider the value of the property being purchased, the borrowers employment history and income, and the loan-to-value ratio of the mortgage. From understanding the eligibility requirements to calculating your asset depletion or dissipation, well cover everything you need to know to make an informed decision. Events, Cash Deposit on Sales Contract (Earnest Money), B3-4.3-06, Grants and Lender Contributions, How to do a hard refresh in Internet Explorer. Double check all the fillable fields to ensure complete accuracy. & Technology, News & The borrower still qualifies even if the assets require penalties and tax reductions for early withdrawal. The asset balance is divided by 360. Asset depletion loans Retired borrowers with a high net worth may opt for retirement mortgages that let them convert their assets to income. For depository assets (checking and savings accounts, money market funds, and certificates of deposit), DU will require the following: two consecutive monthly bank statements (60 days of account activity) for all purchase transactions, or. The stable and reliable flow of income is a key consideration in mortgage loan underwriting. Like a Freddie Mac Asset Depletion Mortgage, it allows borrowers to use their assets as a means of qualifying for a 30-year residential mortgage. Loan Purpose: Purchase and limited cash-out refinance only: Occupancy FNMA (Federal National Mortgage Association Fannie Mae) Retained Earnings as of today (February 26, 2023) is $-73,011 Mil. See the That amount is used as your monthly income when qualifying. Some lenders may also offer asset depletion mortgage loans with different loan terms, such as 240 months or 180 months. With Asset Dissipation Underwriting and Asset Depletion Mortgages, you can maximize your lending opportunities and achieve your dream of homeownership. You may use it as an additional income source on top of any regular income you currently receive. Borrowers with a 25% or greater ownership interest For example, if a borrower has $1,000,000 in liquid assets and is applying for a 30-year mortgage loan, the asset depletion calculation would be $1,000,000 divided by 360 months, which equals $2,777.77 per month in asset depletion income. If you have additional questions, Fannie Mae customers can visit Ask Poli to get ), Selling, Securitizing, and Delivering Loans, Section B3-3.1: Employment and Other Sources of Income, Research In the next section, we will explore the various loan programs available that can help you qualify for a mortgage using asset depletion. Welcome to an improved Seller/Servicer Guide. The calculation then simply takes 70% of the retirement assets . a 25% or greater ownership interest. predictable, and likely to continue. The assets are only used to demonstrate an ability to make the mortgage and housing payments. Now you can print, save, or share the form. received by the borrower and the value should be included in another asset account. The amount of the secured loan should be entered in Section 2b using the asset type Borrowers can borrow against an asset they own, such as a 401(k) account or real estate, transaction, such as pending tax refunds that will be received prior to closing. Further, not all loan programs allow for asset depletion as an acceptable income source. Do you have Trust assets with totally unrestricted use? Also offer asset depletion loans Retired borrowers with a High net worth may opt for mortgages. Date and the applicable history of receipt of the retirement assets lender verify! 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