Quick answer: An asset depletion mortgage converts a documented pool of liquid assets into a monthly income figure. The file is then underwritten on that figure like any other loan. Under Fannie Mae's published rule the math is simple. Take the eligible assets, subtract any distribution penalty and the money needed to close, then divide what remains by the amortization term in months. Nothing about the process removes underwriting. It replaces one kind of proof with another.
First of all, asset depletion goes by several names. Lenders call it asset utilization, asset qualification, or an asset-qualifier program. The marketing around it is often careless, and some of it implies a borrower can skip the income question entirely. That implication is wrong. Moreover, it matters, because the borrowers this product serves cannot afford a surprise at underwriting.
So here is the honest version. Asset depletion is alternative documentation with its own set of rules. Regulation Z still requires the lender to consider the borrower's income or assets other than the dwelling, and to verify whatever it relies on through third-party records. The account statements replace the pay stubs, yet the scrutiny does not shrink. What changes is which document proves the borrower can repay.
Key takeaways
- The formula is assets minus penalty minus cash to close, divided by the loan term in months. Fannie Mae publishes it in Selling Guide B3-3.4-06. Notably, the divisor is the amortization term rather than a fixed number of years.
- There is no across-the-board haircut on the conventional version. A widely repeated claim says lenders count 70 percent of a portfolio. In fact, on Fannie's rule, 70 percent is the loan-to-value ceiling rather than an asset discount.
- The one real deduction is a distribution penalty. If cashing out the whole account today would trigger a penalty, that penalty amount comes off before the division.
- Checking and savings usually do not count as income here. Fannie treats ordinary deposit balances as ineligible unless their source was itself an eligible employment-related asset, such as a severance package or a lump-sum retirement distribution.
- Assets used as reserves are doing a completely different job. Reserves are measured in months of housing payment. Furthermore, they stay in the account and never become income.
- Sometimes the right answer is a plain conventional loan. Pension, annuity and Social Security income already qualify on their own. Indeed, Regulation B forbids discounting income simply because it is a retirement benefit.
How does an asset depletion mortgage actually work?
In practice, three steps turn a portfolio into a number an underwriter can use. First the lender establishes which assets are eligible. Next it reduces that pool by anything the borrower cannot actually keep. Finally it divides the remainder across the life of the loan.
The three-step calculation
Fannie Mae calls the result "net documented assets," and the guide spells out each subtraction. The table below follows the order the calculation runs in.
| Step | What happens | Why the guide requires it |
|---|---|---|
| 1. Identify eligible assets | Count only accounts the rule allows. The borrower must own them alone, or a co-owner must be a co-borrower. | Money a borrower cannot reach alone is not money the file can spend. |
| 2. Subtract any distribution penalty | If a complete distribution today would trigger a penalty, subtract that penalty amount. | The guide values the account at what a full withdrawal would actually deliver. |
| 3. Subtract cash to close | Remove the down payment, the closing costs, and any required reserves. | Those dollars leave the account at closing, so they cannot also produce income. |
| 4. Divide by the amortization term | Divide net documented assets by the loan term expressed in months. | The loan itself defines the income stream, so no continuance history is required. |
Notice what step four does not say. It does not say 60 months, and it does not say 84 months. Fannie ties the divisor to the amortization term, so a 30-year loan divides by 360. Many non-QM lenders write their own divisors instead, and those numbers vary widely between programs. Therefore the first question is simple. What do you divide by, and where is that written down?
Worked example: the same account, two different penalty situations
Consider a borrower with a single rollover IRA holding $1,200,000. The purchase needs $260,000 for the down payment, closing costs, and required reserves combined. The loan is a 30-year fixed, so the amortization term is 360 months.
Case A. A complete distribution today would carry a 10 percent early-distribution additional tax.
10% of $1,200,000 = $120,000. Eligible assets after the penalty: $1,200,000 − $120,000 = $1,080,000.
Net documented assets: $1,080,000 − $260,000 = $820,000.
Monthly figure: $820,000 ÷ 360 = $2,277.78 per month.
Case B. No penalty would apply to a complete distribution.
Net documented assets: $1,200,000 − $260,000 = $940,000.
Monthly figure: $940,000 ÷ 360 = $2,611.11 per month.
The gap between the two cases is $2,611.11 − $2,277.78 = $333.33 per month, which is exactly $120,000 ÷ 360.
Every figure above is arithmetic on made-up inputs. It is not a quote, an offer, an approval, or a commitment to lend. Nor does it predict what any lender would allow on a real file.
Why the amortization term changes the answer
Run Case A again on a 15-year loan and the picture shifts. Dividing $820,000 by 180 months produces $4,555.56 per month, which is double the 30-year figure. That looks like free qualifying power, and it is not. The shorter term also produces a much larger monthly payment. As a result, the debt-to-income ratio can land in the same place or worse.
In other words, the divisor is not a lever to pull. It is a description of the loan you actually chose. Anyone who offers to improve your numbers by shortening the term is describing half of the equation.
Which accounts count, and at what value?
Above all, this is where most published summaries go wrong. The conventional rule does not apply a blanket percentage to a portfolio. Instead the treatment differs sharply by account type. Below is what Fannie's guide actually says.
Retirement accounts and the distribution question
A 401(k), IRA, SEP or Keogh account can work here. However, the borrower needs what the guide calls unrestricted access. Specifically, the borrower must hold the unqualified and unlimited right to request a distribution of every dollar in the account. Furthermore, these accounts qualify in only two situations. Either no distribution is set up yet, or the distribution already running is too small to qualify.
The penalty subtraction is a tax mechanic rather than a lending judgment. The IRS imposes a 10 percent additional tax on early distributions from qualified retirement plans. That tax generally applies to distributions taken before age 59½. Several statutory exceptions exist, including separation from service after age 55 for plans other than IRAs. Therefore the real question is narrow. What would a complete distribution cost on that specific account today?
Investment accounts, stocks and mutual funds
Here the guide draws a line people miss. Vested stocks, government bonds and mutual funds are acceptable sources of funds for down payment, closing costs and reserves. That is not the same as producing qualifying income, and a plain taxable investment account does not generate employment-related-asset income on its own. Those same holdings are valued the same way when they sit inside an eligible retirement account. Meanwhile the lender documents value from the most recent monthly or quarterly statement. For reserves, the guide allows 100 percent of that value and does not require liquidation. For down payment and closing costs the test is different. When the asset is worth at least 20 percent more than the funds needed, no proof of actual receipt is required. Otherwise the borrower must document that the money really moved.
Checking and savings accounts
In particular, ordinary deposit accounts are the surprise. Fannie states that checking and savings balances are generally not eligible as employment-related assets. However, one exception matters a great deal for recent business sellers. The balance qualifies when its source was an eligible employment-related asset, such as a severance package or a lump-sum retirement distribution. The file documents those funds with a distribution letter from the employer on Form 1099-R, deposited into a verified asset account.
| Account type | Eligible as income? | What the file must show |
|---|---|---|
| 401(k), IRA, SEP, Keogh | Yes, with unrestricted access | Most recent monthly, quarterly or annual statement, plus the account's asset composition |
| Severance or lump-sum retirement package | Yes | Distribution letter from the employer (Form 1099-R), deposited into a verified asset account |
| Checking and savings | Generally no | Eligible only when the balance's source was itself an eligible employment-related asset, for example a severance or lump-sum retirement distribution |
| Stocks, bonds and mutual funds inside a retirement account | Yes, as part of that account | Value determined under the guide's rules for stocks and mutual funds |
| Virtual currency | No | The guide excludes it outright |
What is excluded, and why?
Of course, exclusions are not arbitrary. Each one exists for a reason. The asset is either not employment-related, not vested, or not reliably valued at the moment of underwriting.
The named exclusions
Fannie lists non-employment-related assets as ineligible. Specifically, the guide names stock options, non-vested restricted stock, lawsuit proceeds, lottery winnings, proceeds from the sale of real estate, inheritance, and divorce proceeds. Virtual currency is excluded as well. Meanwhile the reserve rules exclude a related set. Examples include unvested funds and funds a borrower cannot withdraw except upon retirement, termination, or death.
Notably, two of those exclusions catch people off guard. An inheritance feels exactly like the liquid wealth this program serves. Still, it does not qualify under the conventional rule, because the money is not employment-related. Proceeds from selling a property land in the same bucket for the same reason. In both cases the funds may still work as down payment or reserves, which is a different question entirely.
Seasoning into a trust does not reset the clock
Meanwhile, one anti-structuring provision is worth knowing. Suppose eligible employment-related assets moved into a trust within 12 months of the application date. The guide requires the income calculation to follow the same table anyway. Moving money does not convert it into a different kind of money.
None of this makes an excluded asset worthless. It simply means the file needs a different theory of repayment, which is the reasoning behind every alt-doc program. For the wider framing, our guide to what actually puts a mortgage outside the qualified-mortgage rules covers the category this product belongs to.
How is this different from an asset-based loan or from reserves?
Frequently, people blend three ideas together in conversation, and the three behave very differently in a loan file. Separating them is the fastest way to tell whether a lender is describing a real program or a slogan.
| Concept | What the assets do | How the decision is made |
|---|---|---|
| Asset depletion or asset utilization | Convert into a monthly income figure | The figure enters the debt-to-income ratio, and the file is underwritten normally from there |
| Asset-based or asset-qualifier lending | Stand on their own as the qualifying basis | Program-specific. The individual lender sets the terms, not a published agency rule, so ask for the formula in writing |
| Reserves | Stay in the account after closing | Measured in months of the qualifying housing payment, and never converted into income |
Why the reserve distinction matters most
Above all, reserves are the concept borrowers most often mistake for income. Fannie defines liquid financial reserves as assets available after the mortgage closes. The measure is how many months of principal, interest, taxes, insurance and association dues the borrower could cover. Funds to close come out before that measurement runs.
So the same investment account can do three separate jobs on one file. It can supply the down payment. It can sit behind the loan as reserves. Finally, a portion can generate qualifying income. Consequently, a dollar cannot be counted twice, and the calculation above subtracts cash to close for exactly that reason.
What documentation and seasoning does the file need?
Even so, alt-doc does not mean light-doc. The paperwork simply points at accounts instead of employers, and the standards for those statements are specific.
How many statements, and how recent
Fortunately, conventional asset documentation runs on a clear schedule. Purchase files need statements covering the most recent full two-month period, which is 60 days. Quarterly-reporting accounts use the most recent quarter instead. Refinances need one full month, or 30 days. Additionally, a stale statement triggers one more step. When the latest statement is more than 45 days older than the application date, the lender should ask for a supplemental bank-generated document showing the last four digits, the balance, and the date.
Beyond that, every statement has to identify the institution and name the borrower as account holder. It also has to show at least the last four digits of the account number, state the period covered, list all transactions, and give the ending balance. Retirement account statements must additionally identify the vested amount and the account terms.
Ability to repay still governs the file
This is the part the marketing skips. Regulation Z requires a creditor to make a reasonable, good-faith determination that the consumer can repay. Moreover, the creditor must consider current or reasonably expected income or assets other than the value of the dwelling. Verification has to come from reasonably reliable third-party records, and the rule names financial institution records explicitly.
In short, an asset depletion file is not a shortcut around underwriting. It is a file that satisfies the same legal standard using account statements. The rest of the paperwork looks familiar too. Indeed, the document list every mortgage file starts from still applies to identity, credit, and the property itself.
The eligibility box on the conventional version
Importantly, Fannie's rule carries firm parameters, and they narrow the product considerably. Loan-to-value, combined loan-to-value and home-equity combined loan-to-value all cap at 70 percent. That ceiling rises to 80 percent when the owner of the qualifying assets is at least 62 years old at closing. Furthermore, if the asset is jointly owned, all owners must be borrowers on the loan, and the borrower using the income to qualify must meet that age at closing. Regulation B permits the parameter, because it favors the elderly applicant rather than penalizing anyone. Occupancy covers a principal residence or a second home only. Loan purpose covers purchases and limited cash-out refinances only.
Who is this product actually built for?
In our experience, two borrower profiles account for most of the asset depletion files we see, and both share one trait. Their balance sheet is strong while their reported income is modest.
The portfolio owner with modest reported income
Specifically, someone whose wealth sits largely in retirement and investment accounts may show very little taxable income in a given year. The accounts are real, the access is unrestricted, and a conventional income calculation simply has nothing to grab. Asset depletion gives the underwriter a defensible number to work with instead.
The recently liquid business seller
For example, a seller who has just closed on their company often has a large deposit balance and no current employment income. Here the source rule decides everything. When the balance arrived as a severance or lump-sum retirement distribution, it can qualify with the right documentation. When it arrived as proceeds from selling a business or a property, the conventional rule treats it as ineligible. Consequently, the file needs a different structure. That distinction is worth confirming before anyone writes an offer.
Meanwhile, business owners still filing returns often have better options elsewhere. Our guide to how business income becomes qualifying income on a conventional file walks through the ordinary path. Similarly, reading deposits instead of tax returns covers the bank-statement route.
Not sure which document set your file should run on?
Tell us where the assets sit, whether any distribution is already running, and what you are buying. We will map the file to the program that fits it rather than the one with the catchiest name. Call (702) 696-9900 or start online.
Start a fast quoteWhen is asset depletion the wrong tool?
Often, frankly. This section exists because the product is oversold. A borrower who lands in the wrong lane usually pays for it in terms rather than in a decline letter.
Five situations where something else serves you better
You already have documentable income. Pension payments, annuity income and Social Security all qualify under ordinary conventional rules. Moreover, Regulation B forbids a creditor from discounting income because it comes from an annuity, a pension, or another retirement benefit. If that income supports the payment, an ordinary conventional file usually carries fewer restrictions.
You need more than 80 percent financing. The conventional version stops at 70 percent, or 80 percent in the case described above. A borrower who needs a smaller down payment should look at a different income route rather than a larger portfolio.
You are buying a rental. Fannie's rule covers a principal residence or a second home only. For an investment property, underwriting a rental on the property's own numbers is usually cleaner. There the property's income does the work.
You want cash out. Purchases and limited cash-out refinances are the only permitted purposes on this rule. A true cash-out refinance therefore has to qualify some other way.
Your assets sit in an excluded bucket. Inheritance, real estate sale proceeds, lottery winnings, legal settlements and non-vested stock will not produce qualifying income here. Size does not change that.
Missing a parameter does not necessarily end the conversation. Fannie's own eligibility row says that when a loan does not meet these parameters, employment-related assets may still be eligible under other standard income guidelines, naming interest and dividend income (B3-3.4-08) and annuity, pension, or retirement income (B3-3.4-03). In other words, the same accounts can often qualify through a different door. Ultimately, getting this call right is most of the value a lender adds. Weighing several alt-doc structures at once? Then the alt-doc programs we place for Southern Nevada borrowers lays the menu side by side.
Where does this fit in the Las Vegas market?
Overall, local price points push more files toward this conversation than people expect. The reason is arithmetic rather than exotic lending.
The limits that define the local edges
First, two published numbers set the boundaries for 2026. The FHA limit for a one-unit home in Clark County is $541,287. The baseline conforming loan amount Fannie Mae and Freddie Mac will buy is $832,750, and Clark County sits at that baseline rather than in high-cost territory. Note carefully what the second number limits. It caps the loan amount, not the purchase price.
That distinction matters here, because this program caps the loan at 70 percent of value, or 80 percent in the case above. A conforming loan of $832,750 at 70 percent therefore supports a purchase of roughly $1.19 million before any other limit applies, and roughly $1.04 million at 80 percent. Those two figures are illustrative arithmetic on the published limit rather than a quote. Meanwhile a borrower with a large portfolio and a small reported income often shops in exactly that band.
Below the conforming loan amount, the conventional employment-related assets rule may work directly. Above it, the file typically moves to a jumbo or non-QM structure with lender-specific terms. That is the practical reason the same borrower gets different answers from different lenders on the same day. They are quoting different rulebooks. For a baseline, what a Nevada conventional file has to prove before it can close is worth reading first.
What we run first on these files
Valley West takeWe ask one question before anything else on these files. Can we qualify you the ordinary way? Surprisingly often the answer is yes. A pension, an annuity, or a required distribution already covers the payment, and ordinary conventional financing carries fewer restrictions. So we run the conventional math first, and we reach for asset depletion only when the standard path genuinely does not work. When it is the right tool, the next step is unglamorous. Pull the most recent statement for every account, confirm in writing what a complete distribution would cost, and check whether any distribution is already running. We have been lending in Las Vegas since 2004 and we lend in 32 states and DC. Reviewing your statements costs nothing and usually takes one call.
Want the calculation run on your actual accounts?
Send the balances, the account types, and the price range you are shopping. We will show you the arithmetic and tell you plainly whether a conventional file beats the asset route. Call (702) 696-9900 or start online.
Start a fast quoteFrequently asked questions
The calculation
How is an asset depletion mortgage calculated?
Under Fannie Mae's employment-related assets rule, the lender divides net documented assets by the amortization term of the loan in months. Net documented assets equal the eligible assets, minus the penalty a complete distribution would trigger today, minus the funds used for down payment, closing costs and required reserves. A 30-year loan therefore divides by 360. Non-QM lenders outside the agency rules set their own divisors. Ask any lender to put its formula in writing before you rely on it.
Do lenders really only count 70 percent of my assets?
Not under the conventional rule. On Fannie Mae's employment-related assets guideline, 70 percent is the maximum loan-to-value ratio rather than a discount applied to your portfolio. The only deduction the guide requires is the penalty a complete distribution would trigger, plus the money you spend at closing. Individual non-QM programs may apply their own percentage haircuts. That is a separate lender policy, not an agency requirement.
Accounts and eligibility
Can I use my checking and savings accounts as income?
Generally no. Fannie Mae states that checking and savings accounts are not eligible as employment-related assets unless the source of the balance was itself an eligible employment-related asset. A severance package or a lump-sum retirement distribution is the usual example. The file documents those funds with a distribution letter from the employer on Form 1099-R, deposited into a verified asset account. Ordinary savings can still serve as down payment or reserves.
Does an early withdrawal penalty affect the calculation?
Yes. If a penalty would apply to a complete distribution from the account at the time of calculation, the guide subtracts that penalty amount before computing the income. The IRS imposes a 10 percent additional tax on early distributions from qualified retirement plans. That tax generally applies to distributions received before age 59 and a half, and several statutory exceptions exist. Confirm with your tax advisor what a full distribution from your specific account would actually cost.
What assets cannot be used at all?
Fannie Mae lists non-employment-related assets as ineligible. The guide names stock options, non-vested restricted stock, lawsuit proceeds, lottery winnings, proceeds from the sale of real estate, inheritance, and divorce proceeds. Virtual currency is also excluded. Many of those assets can still be used for down payment or reserves, so an exclusion here does not mean the money is useless to your file.
Fit and alternatives
Is an asset depletion mortgage the same thing as an asset-based loan?
No. Asset depletion converts a documented pool of assets into a monthly income figure, and the file is then underwritten on debt-to-income like any other loan. Asset-based or asset-qualifier programs treat the asset total itself as the qualifying basis, and the individual lender sets those terms rather than a published agency rule. Reserves are a third idea entirely. Those are assets that must remain available after closing, measured in months of housing payment, and they never become income.
Can I use an asset depletion loan to buy a rental property in Las Vegas?
Not under the conventional rule, which limits the program to a principal residence or a second home and to purchases and limited cash-out refinances. For an investment property, a DSCR loan usually fits better because the property's own rental income supports the qualification. Some non-QM lenders offer asset-qualifier programs on investment property under their own guidelines. So the answer depends entirely on which rulebook your file runs to.
The bottom line
In summary, an asset depletion mortgage is a documentation strategy, not an escape hatch. The lender counts eligible accounts, subtracts what a full distribution would cost and what closing will consume, then divides the rest across the loan term. Afterward the file goes through ordinary underwriting with that figure in place of a pay stub.
Consequently, the useful questions are narrow ones. Which of my accounts are eligible? What would a complete distribution cost today? What divisor does this lender use, and is it written down? Finally, and most importantly, would a plain conventional loan qualify me anyway? For many of the borrowers who ask about this product, the last answer is yes, and that is the cheaper conversation to have first.
Sources
Conventional guidelines
- Fannie Mae Selling Guide B3-3.4-06, Employment Related Assets as Qualifying Income (03/04/2026). Source of the eligibility parameters, the ineligible-asset list, and the net documented assets calculation: selling-guide.fanniemae.com
- Fannie Mae Selling Guide B3-4.2-01, Verification of Deposits and Assets (05/04/2022). Source of the 60-day purchase rule, the 30-day refinance rule, and the 45-day supplemental rule: selling-guide.fanniemae.com
- Fannie Mae Selling Guide B3-4.3-03, Retirement Accounts (06/30/2015). Source of the vesting and withdrawal-access requirements for retirement funds: selling-guide.fanniemae.com
- Fannie Mae Selling Guide B3-4.3-01, Stocks, Stock Options, Bonds, and Mutual Funds (06/30/2015). Source of the valuation rules and the 20 percent receipt-documentation threshold: selling-guide.fanniemae.com
- Fannie Mae Selling Guide B3-4.1-01, Minimum Reserve Requirements (08/07/2024). Source of the definition of liquid financial reserves and the unacceptable-sources list: selling-guide.fanniemae.com
Federal regulation
- 12 CFR § 1026.43(c), Regulation Z. Requires a reasonable and good faith repayment-ability determination, requires consideration of income or assets other than the value of the dwelling, and requires verification through reasonably reliable third-party records including financial institution records: ecfr.gov
- 12 CFR § 1002.6(b), Regulation B. Paragraph (b)(2)(iv) permits a creditor to consider the age of an elderly applicant when age favors that applicant. Paragraph (b)(5) prohibits discounting income because it is an annuity, pension, or other retirement benefit: ecfr.gov
- Consumer Financial Protection Bureau, Regulation Z § 1026.43 and official interpretations: consumerfinance.gov
Tax and loan limits
- IRS Topic no. 558, Additional tax on early distributions from retirement plans other than IRAs. Source of the 10 percent additional tax, the age 59½ threshold, and the statutory exceptions, including separation from service after age 55 for plans other than IRAs: irs.gov
- IRS Topic no. 557, Additional tax on early distributions from traditional and Roth IRAs. The companion rule for the IRA in the worked example: irs.gov
- U.S. Department of Housing and Urban Development, FHA single-family forward mortgage limits for 2026. The one-unit limit for Clark County, Nevada is $541,287: hud.gov
- Federal Housing Finance Agency, "FHFA Announces Conforming Loan Limit Values for 2026" (November 25, 2025). Baseline one-unit conforming loan limit of $832,750: fhfa.gov
Across Valley West: Each program keeps its own site. Veterans comparing entitlement and documentation can start at our Nevada veterans' loan desk. Buyers looking at a lower down payment will want where the FHA program is broken down step by step. Borrowers heading toward agency financing should see where conforming loan guidance lives. Finally, covering the home after you own it is a question for our insurance agency.
Keep reading
- Alt-docWhat is a non-QM loan?The definitional pillar behind every alternative documentation program.
- QualifyNo tax return mortgage optionsBank statement and DSCR routes when returns understate the money.
- QualifySelf-employed mortgage guideHow lenders turn business income into qualifying income.
- InvestDSCR loan requirementsWhat a rental has to prove when the property carries the file.
Last updated: July 26, 2026 — new guide to asset depletion, asset utilization and asset-qualifier mortgages for Las Vegas borrowers. The calculation, eligibility parameters, ineligible-asset list and documentation rules quote Fannie Mae Selling Guide B3-3.4-06 as issued 03/04/2026 under Announcement SEL-2026-02, verified against the live guide text rather than a status code. Asset documentation timing quotes B3-4.2-01. Retirement-account access quotes B3-4.3-03. Securities valuation quotes B3-4.3-01. The reserve definition quotes B3-4.1-01. Ability-to-repay and verification requirements quote 12 CFR § 1026.43(c). Age and retirement-income provisions quote 12 CFR § 1002.6(b). The 10 percent early-distribution additional tax and the age 59½ threshold quote IRS Topic no. 558, with Topic no. 557 cited for the IRA case. The conforming figure is a loan-amount limit rather than a purchase-price limit, and the two supportable-price figures are hand-computed from the published limit and the program's own loan-to-value ceilings. Loan limits come from the HUD 2026 forward mortgage limits file for Clark County, Nevada and the FHFA conforming loan limit announcement of November 25, 2025. Every figure in the worked example is hand-computed and labeled illustrative. This page contains no rate figures.
