Are you looking to buy a new home but struggling to secure a mortgage due to a lack of traditional income? If so, asset depletion utilization may be the solution for you. In this buyer’s guide, we will explore what asset depletion utilization is and how it can be used to secure a mortgage from wholesale lenders.
What is Asset Depletion Utilization?
Asset depletion utilization is a mortgage underwriting method that allows borrowers to use their assets to qualify for a mortgage. This method is particularly useful for borrowers who have a significant amount of assets but do not have a traditional source of income.
Unlike traditional mortgage underwriting, which focuses primarily on the borrower’s income and debt-to-income ratio, asset depletion utilization takes into account the borrower’s assets. The lender will calculate a monthly income based on the borrower’s assets, which can then be used to offset any debt payments.
How Does Asset Depletion Utilization Work?
The first step in utilizing asset depletion is to determine the borrower’s total assets. This includes any cash, investments, retirement accounts, and real estate that the borrower owns. The lender will then apply an annual depletion rate to these assets to calculate a monthly income.
For example, if a borrower has $1 million in assets and a depletion rate of 5%, the lender will calculate a monthly income of $4,167. This monthly income can then be used to offset any debt payments, including the mortgage payment.
What Are the Benefits of Asset Depletion Utilization?
There are several benefits to using asset depletion utilization to secure a mortgage:
- Qualify for a Mortgage with No Income: Asset depletion utilization allows borrowers to qualify for a mortgage even if they do not have a traditional source of income.
- Higher Loan Amounts: Because asset depletion takes into account the borrower’s assets, borrowers may be able to qualify for a higher loan amount than they would with traditional underwriting.
- Lower Debt-to-Income Ratio: By using asset depletion, borrowers can lower their debt-to-income ratio, which can make them more attractive to lenders.
Who Can Benefit from Asset Depletion Utilization?
Asset depletion utilization can be beneficial for a variety of borrowers, including:
- Self-Employed Borrowers: Self-employed borrowers often have fluctuating income, making it difficult to qualify for a mortgage using traditional underwriting. Asset depletion utilization can help these borrowers qualify for a mortgage based on their assets.
- Retirees: Retirees may have significant assets but limited income, making it difficult to qualify for a mortgage using traditional underwriting. Asset depletion utilization can help these borrowers qualify for a mortgage based on their assets.
- High Net Worth Borrowers: High net worth borrowers may have significant assets but limited income, making it difficult to qualify for a mortgage using traditional underwriting. Asset depletion utilization can help these borrowers qualify for a mortgage based on their assets.
How to Find Wholesale Mortgage Lenders that Offer Asset Depletion Utilization
Not all mortgage lenders offer asset depletion utilization, so it’s important to do your research to find wholesale lenders that offer this option. Here are a few tips to help you find wholesale lenders that offer asset depletion utilization:
- Do Your Research: Look for information online about wholesale lenders that offer asset depletion utilization. Read reviews and check their ratings with the Better Business Bureau.
- Work with a Mortgage Broker: A mortgage broker can help you find wholesale lenders that offer asset depletion utilization. They can also help you navigate the mortgage application process.
- Ask Your Real Estate Agent: Your real estate agent may be able to recommend wholesale lenders that offer asset depletion utilization.
Conclusion
Asset depletion utilization can be a valuable tool for borrowers who have significant assets but do not have a traditional source of income. By taking into account the borrower’s assets, asset depletion utilization can help borrowers qualify for a mortgage and secure their dream home. If you’re interested in utilizing asset depletion utilization, be sure to do your research and find wholesale lenders that offer this option.