“Can you get a mortgage with assets but no income?” Well, if I had a dollar for every time I got asked this question, I’d probably then have documentable income and it would send us back to the start of the conversation, right? Seriously, what we’re going to cover here are the key points of getting a home loan when you have substantial liquid assets (cash equivalents, stocks, bonds, mutual funds and even retirement accounts) but don’t have the traditional income sources that lenders want to see when they go to approve you for a purchase or a refinance loan. In years past and since the extinction of the stated income loan, it’s both very likely and unfortunate that many potential borrowers — both young and old, and regardless of their net worth — just assumed that without a steady paycheck and W-2, that no residential mortgage lender was going to approve them. Even though, as they’d often exclaim, that they could “Pay for the darn home in cash!,” they still couldn’t secure even a small mortgage. No income in black and white, no dice. That was the pervasive attitude and too often the result.
Not today. Asset utilization, also known as asset dissipation, asset depletion or “asset-backed” mortgages allow us to derive a hypothetical income stream from the borrower’s liquid assets and with that figure, qualify for a mortgage just as if that income came from wages, bonuses or commissions. The borrower does not need to pledge or liquidate the assets. We assume that the borrower will, once the mortgage is in place, use those funds to meet the monthly payment requirements one way or another and we recognize that where a reliable and verifiable investing and savings pattern has been established, especially in conjunction with a good credit score, it’s highly unlikely this borrower is going to default on the loan.
Who We Can Help
The target market for an asset-based loan qualification consists of those who have substantial liquid assets. Let’s define this as more than $750K in cash equivalents, stocks, bonds, mutual funds and other like investments. Retirement accounts may count depending on the borrower’s age. What doesn’t get factored into our net worth equation? Real estate and other non-liquid assets. Private, non-publicly traded assets are also out. Bitcoin / cryptocurrency is unfortunately not going to work for these programs. Think of it this way — if you can produce statements for the asset, as you could from any bank or investment brokerage, you will likely be able to use the asset in our calculation. Once we have an asset basis, we’ll apply a formula to create an equivalent monthly income. One of the advantages to working with us on these programs is that we have multiple investors, each with its own qualifying criteria. Some more aggressive than others.
How Do Asset Backed Loans Work?
Once a borrower meets the criteria for an asset utilization program, the actual loan program looks incredibly similar to the mortgage that a traditionally-qualified borrower might otherwise get. Often, but not always, the loan options are hybrid ARMs, like a 7/1 ARM, for example. Several of our asset depletion investors offer fixed rate loans too. Technically, these programs are considered “non-QM” but that’s not necessarily a detriment to the consumer. In fact, this categorization may open the door to also having access to an interest-only payment option and a debt-to-income (DTI) ratio that exceeds 43%. Depending on the borrower’s needs, that can be great news.
If you’ve been shut out of mortgage qualification even though you’ve done an incredibly good job of saving and investing — or maybe you’re an entrepreneur who’s onto your next project with the success of your last one in the bank — we may have a great fit for your borrowing needs. If I can help with any questions you have about an asset-backed (asset depletion or utilization) loan, get in touch any time and I’ll be happy to provide detail.
Backed to the future,
Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959 Fax: 415-366-1590
rob.spinosa@rate.com
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709
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