Now that we have a good understanding of asset depletion and how it works, lets talk about the importance of this concept in mortgage lending. the most recent two-year period, and. Dissipation of marital assets refers to the unauthorized or improper use of marital property or assets by one spouse during a marriage. In fact, there are plenty of folks who fit into non-traditional income categories, such as: If any of these apply to you, but you have significant assets such as savings, investments, or retirement accounts you may qualify for an asset depletion mortgage program. 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. Dynamic Leader Specializing in Mortgage Underwriting and Decision Quality Management. The Benefits of Asset Depletion Mortgage Loans. Are you retired with very little fixed income (or no income)? commissions, bonuses, substantial amounts of overtime pay, or employment that is subject of continued receipt of the income for at least three years. By taking these steps, borrowers can increase their chances of qualifying for an asset depletion mortgage and secure the financing they need to purchase a home or refinance an existing mortgage. Proceeds from properties that have already been sold must be included in a depository of an asset, care must be taken when this is the sole source or the majority of qualifying feel free to email, two consecutive monthly bank statements (60 days of account activity) for all purchase to prior years earnings using the borrowers W-2s or signed federal income tax returns quarterly, or annually) to arrive at an accurate calculation of the monthly income In this case the loan amount would be based on retirement assets only, with a 10% reduction since we were younger than 59-. borrowers history of receipt, the frequency of payment, and the trending of the amount 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. B3-4.3-14, Bridge/Swing Loans for additional information. to be used in the trending analysis (see below). Borrowers need to provide documentation of their assets, such as IRA account statements. Take a moment to read Robyn A. Friedman's "Age Is Just a NumberExcept When You're Applying for a Mortgage' in The Wall Street Journal. Can be used for a marital or non-marital property. These installments are then used to meet income requirements for the loan. These typically include: Not all retirement accounts will qualify, depending on the mortgage borrowers age and potential penalties applied for accessing funds in the account. version of a page. In this section, well discuss the eligibility criteria and the necessary documentation borrowers must provide to qualify for an asset depletion mortgage loan. Borrowers need to have a debt-to-income ratio that meets the program requirements. Additionally, the company announced a one-month extension to flexibilities that enable lenders to sell to Fannie Mae single . There are two ways to do this. Many of the larger banks offer asset depletion mortgages. . However, borrowers hoping for an income boost with liquidable assets are required to use funds from retirement accounts only . Fannie Mae Guidelines Employment-Related Assets as Qualifying Income 33 Asset Requirements -If the employment-related assets are in the form of stocks, bonds, and mutual funds, 70% of the value (remaining after costs for the transaction and consideration of any penalty) must be used to determine the income stream to income. Freddie Mac Asset Depletion Mortgage Program. 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. Note: All income must be translated to U.S. dollars. (b) the amount of funds used for down payment, closing costs, and required reserves. Both programs allow borrowers to use their assets, such as retirement accounts, stocks, and savings, to offset the lack of traditional income when qualifying for a mortgage. even if the loan funds have been deposited. are likely to continue, the lender may develop an adjusted gross income for the B3-3.1-09, Other Sources of Income. Ineligible assets are non-employment-related assets (for example, stock options, non-vested restricted stock, lawsuits, lottery winnings, sale of real estate, inheritance, and divorce proceeds). non-U.S. citizens: copies of the borrower's signed federal income tax returns filed with the IRS for transactions, or. The stable and reliable flow of income is a key consideration in mortgage Having Issues with Seeing this Page Correctly? How to do a hard refresh in Internet Explorer. (For best result, pose your search like a question. Employed by a foreign corporation or a foreign government and paid in foreign currency Guidance for documenting access to income and business liquidity If the Schedule K-1 reflects a documented, stable history of receiving cash distributions of income from the business This program allows you to deplete your assets as a way to count that money as income for the duration of the loan. The annuity stream is added to the applicant's other income when evaluating the applicant's ability to make mortgage payments. What are the loan parameters to use employment-related assets as qualifying income? (or a standard Verification of Employment completed by the employer or third-party This video helps you understand what an escrow account is and how it can make managing your home's property taxes and insurance premiums easier. Center, Apps may it be averaged over the period when the declination occurred. After taking out $10,000 for closing costs and dividing by 360, the. In conclusion, a Fannie Mae asset depletion mortgage is a mortgage option that can help borrowers with little or no traditional income to qualify for a mortgage by using their assets as qualifying income. Asset depletion loans Retired borrowers with a high net worth may opt for retirement mortgages that let them convert their assets to income. Overall, intentional dissipation is a controversial strategy that should be carefully considered before being used by borrowers. If you have additional questions, Fannie Mae customers can visit Ask Poli to get For other This level of documentation may not be adequate for every borrower and every situation. Form 91 may be used to analyze the Borrower's tax returns and calculate self-employed monthly gross income. that are pending sale. Now you can print, save, or share the form. 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. employment verification vendor). Jul 2020 - Nov 20222 years 5 months. Brecksville, Ohio, United States. The amount of the gift or grant is not included in available funds. 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. It can have serious legal and financial consequences, including the affected spouse seeking to recover their share of the dissipated assets through negotiation or litigation. History of Receipt: Two or more years of receipt of a particular type of variable income is recommended; The following table provides the requirements for employment-related assets that may be used as qualifying income. 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. Apply now. In this article, well explore the ins and outs of these innovative lending strategies and how they can benefit you. Also known as asset dissipation, asset depletion is a way to qualify for a loan using substantial assets rather than income from employment. It involves calculating a borrowers ability to repay a mortgage loan based on their liquid assets, such as retirement accounts, investment accounts, money market accounts, and other similar assets. If you still have Technical Support questions, Refer to Chapter B5-7: High DU will not require documentation of assets for refinance transactions when the total party to the property sale or purchase. Under the new guidelines, you'd still be able to deplete $210,000 of $300,000 in savings. Note that you can do this for regular expenses as well, and in some cases you should (for ex: to defer a sale to move from st cap gains to lt cap gains) Sounds like that's what you did. Gifts and grants are entered in Section 4d of the loan application and identified date, and the lender must confirm that the funds in the account have not been transferred Federal National Mortgage Association Fannie Mae's depreciation, depletion and amortization for the three months ended in Dec. 2022 was $0 Mil. If you have questions about money, I will help you find the answers at www.MichaelRyanMoney.com. Net documented assets are equal to the sum of eligible assets minus: (a) the amount of the penalty that would apply if the account was completely distributed at the time of calculation; and. documentation requirements described in this Chapter. So, lets explore the calculation of asset depletion and how it factors into the underwriting process. If you still have Technical Support questions, Once your total assets have been calculated, the balance is divided by 360 (regardless of loan terms) to be split into monthly installments. 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 Note: Eligibility requirements and application process may vary by lender. Assets used for the calculation of the monthly income stream must be owned individually by the borrower, or the co-owner of the assets must be a co-borrower of the mortgage loan. MGIC's self-employed borrower (SEB) and income analysis worksheets are uniquely suited for analyzing: Cash flow and YTD profit and loss (P&L) Comparative income. Foreign assets . ), Bridge loans should also be considered in the net equity calculation for properties using the income amount in the trending analysis. When applying for an asset depletion mortgage loan, borrowers should be prepared to work closely with underwriters. This may include providing documentation for income sources and details on the types of assets being used in the asset depletion calculation. However, a disadvantage of this mortgage option is that it typically has higher interest rates and fees compared to traditional mortgages. California Residential Mortgage Lending Act (CRMLA) License Number - 603L284 California - DFPI Residential Mortgage Lending Act License Number - 41DBO-13449. CASH FLOW ANALYSIS (Fannie Mae Form 1084) Instructions. Another strategy for overcoming hurdles in the asset depletion mortgage process is to explore alternative sources of income. Virtual currency is not an eligible asset. and must be subtracted from net equity before entry in the loan application. Borrowers need to intentionally deplete their assets. 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