Note:
FHA, VA, USDA, Do Not Permit Asset Depletion as Income
Asset Depletion Calculations
Eligible Assets
$2,200
- Funds to be used for:
Closing Costs
$7,390
Down Payment
$4,197
Required Reserves
$4,197
- Full Distribution Penalty
$4,197
- Gift & Borrowed Funds
$0
- Assets Pledged as Collateral
$0
Total Assets For Income
$13,787
Monthly Income Amount
$15,000
Requirements (view details on the Freddie Mac website)
Loan Programs
- Purchase or “no cash-out” refinance only
- 1–2-unit Primary or 2nd home only
- Maximum 80% LTV/TLTV1
Retirement Assets
- The retirement assets must be in a retirement account recognized by the Internal Revenue Service (401(k), IRA.
- Borrower must be the sole owner.
- The asset must not currently be used as a source of income by the Borrower.
- As of the Note Date, the Borrower must have access to withdraw the funds in their entirety, less any portion pledged as collateral for a loan or otherwise encumbered, without being subject to a penalty or an additional early distribution tax.
- The Borrower's rights to the funds in the account must be fully vested.
Lump-sum distribution funds not deposited to an eligible retirement asset
If the lump-sum distribution funds have been deposited to an eligible retirement asset, follow the requirements for retirement assets described above.
Lump-sum distribution funds must be derived from a retirement account recognized by the IRS (e.g., 401(k), IRA) and must be deposited to a depository or non-retirement securities account.
- A Borrower must have been the recipient of the lump-sum distribution funds.
- Parties not obligated on the Mortgage may not have an ownership interest in the account that holds the funds from the lump-sum distribution.
- The proceeds from the lump-sum distribution must be immediately accessible in their entirety.
- The proceeds from the lump-sum distribution must not have been or currently be subject to a penalty or early distribution tax.
Depository accounts and Securities (Section 5501.3(b)(ii))
- The Borrower must solely own assets or, if asset is owned jointly, each asset owner must be a Borrower on the Mortgage and /or on the title to the subject property.
- At least one Borrower who is an account owner must be at least 62 years old.
- As of the Note Date, the Borrower must have access to withdraw the funds in their entirety, less any portion pledged as collateral for a loan or otherwise encumbered, without being subject to a penalty.
- Account funds must be located in a United States- or State-regulated financial institution and verified in U.S. dollars.
Assets from the sale of the borrower’s business
- The Borrower(s) must be the sole owner(s) of the proceeds from the sale of the business that were deposited to the depository or non-retirement securities account.
- Parties not obligated on the Mortgage may not have an ownership interest in the account that holds the proceeds from the sale of the Borrower's business.
- The proceeds from the sale of the business must be immediately accessible in their entirety.
- The sale of the business must not have resulted in the following: retention of business assets, existing secured or unsecured debt, ownership interest or seller-held notes to buyer of business.
Loan Programs
- Purchase or Limited Cash-Out Refinance Only.
- 1-4 Unit Principal Residence & 2nd Home Only.
- Maximum 70% LTV/CLTV/HCLTV or 80% if the owner of the assets being used to qualify is at least 62 years old at the time of closing.
- The asset stream used must be owned individually by the borrower or co-borrower. If the asset(s) is jointly owned, all owners must be a borrower on the loan and the borrower using the income to qualify must be at least 62 years old at the time of closing.
- Assets must be liquid and available to the borrower/co-borrower.
Assets Must Be Sourced as One of the Following
- A non-self-employed severance package or non-self-employed lump sum retirement package.
- A non-self-employed lump sum must be documented with a distribution letter/1099 and deposited into a verified asset account.
- For 401(k) or IRA, SEP, Keogh accounts – provide the most recent account statement and its asset composition.
- The borrower must have unrestricted access to the funds, as well as an unqualified and unlimited right to request a distribution of all funds in the account.
AND - They can only use the accounts if a distribution is not already set up or the distribution amount is not enough to qualify.
