What Is an Asset Depletion Loan? How the Math Works

An asset depletion loan converts a documented pile of assets into a monthly income figure, then qualifies you on that figure. The lender adds up the accounts it will count, subtracts what you are spending to close, and divides the remainder by a set number of months. Nothing gets sold and nothing gets pledged. The arithmetic is the whole product.

What is an asset depletion loan?

The method travels under several names, which is the first thing that makes it hard to research. Lenders market it as asset depletion, asset utilization, asset dissipation, or an asset qualifier program. Federal bank regulators use the third one. The Office of the Comptroller of the Currency defines the practice in Bulletin 2019-36, Lending Standards for Asset Dissipation Underwriting: “ADU, also known as asset depletion underwriting or asset amortization underwriting, uses an applicant’s assets to calculate a hypothetical cash annuity stream.” That bulletin also tells banks their written policy has to specify the “asset dissipation periods” they will use, which is the regulator confirming that the divisor is a lender policy choice rather than a market standard.

Two separate things get called asset depletion, and conflating them is the most common source of bad advice on this topic. There is a conforming version, written to Fannie Mae or Freddie Mac guidelines and sold into the agency market. And there is a non-QM version, written to an individual investor’s own guidelines and either held in portfolio or securitized privately. They share the formula and almost nothing else.

Who asset depletion is built for

• Retirees with large balances and small distributions. The accounts can clearly support a payment; the tax return shows Social Security and a modest draw.
• Sellers of a business. The proceeds landed last quarter and there is no W-2 behind them yet. This is the single most common profile I see reach for it.
• Borrowers between roles, including anyone holding a documented severance package.
• Self-employed owners whose write-offs sink their qualifying income but whose savings did not shrink with it. Those borrowers often compare this against a bank statement loan, covered below.
• Investors whose returns are unrealized, so nothing shows up as income until something sells.

The common thread is a mismatch between a balance sheet and a tax return. If you have never put those two documents side by side, the personal net worth statement is where the balance-sheet half starts.

How asset depletion income is calculated

Net eligible assets divided by a depletion period in months. Three variables decide the outcome: which assets count, what gets subtracted before the division, and the divisor. Programs differ on all three, and the divisor swings the result the hardest.

Step 1: total the eligible assets. Only accounts the program recognizes, verified with statements.

Step 2: subtract the money leaving the pool. Down payment, closing costs, required reserves. Fannie Mae also subtracts any early-withdrawal penalty that would apply if the account were completely distributed at the time of calculation. Freddie Mac separately subtracts gift funds, borrowed funds, and any portion of an asset pledged as collateral or otherwise encumbered.

Step 3: divide by the depletion period.

Here is one borrower run through four paths. Assume a 63-year-old buying a primary residence with $1.5 million in an IRA they can withdraw in full without penalty, and $230,000 going toward the down payment, closing costs, and reserves. The pool is deliberately simple so the only thing changing between rows is the divisor.

Same borrower, same assets, a sixfold spread in qualifying income. That is why “do I qualify for asset depletion” has no general answer, and why the productive question to ask a loan officer is which divisor their program uses before discussing anything else.

Change the composition of that $1.5 million and the rows stop moving together. Held in an ordinary taxable brokerage account, the pool knocks the Fannie Mae row out entirely, because Fannie counts only employment-related assets. It survives under Freddie Mac only because this borrower is 63: the age-62 account-owner condition covers securities and depository accounts alike, so the same brokerage or checking balance is unusable for a 58-year-old under that program. The eligibility section below is where those distinctions live, and they decide more files than the divisor does.

The agency divisors are fixed by guideline. Fannie Mae divides “Net Documented Assets” by the amortization term of the loan in months, so a 30-year loan gets 360 and a 15-year loan gets 180. Freddie Mac moved its own divisor from 360 to 240 in a 2019 Guide Bulletin after concluding the prior calculation was too limiting, and 240 now applies regardless of loan term.

Non-QM divisors are set by each investor. Published wholesale guidelines show the range plainly: EPM’s CORE program calculates monthly income as net qualified assets divided by 84 months, while LoanStream’s asset utilization product divides by 60. Neither number is standardized, and neither is negotiable within a given program.

That growth is why more loan officers can quote an asset program today than could three years ago. Non-QM reached 9% of total rate-lock volume in June 2026, up 1.4 percentage points year over year, according to Optimal Blue’s Market Advantage report.

Which assets count, and which do not

The conforming programs are narrower than most summaries admit, and the narrowness lives in the eligibility list rather than in the formula.

Fannie Mae’s version is titled Employment Related Assets as Qualifying Income, and the adjective is doing real work. Eligible sources are limited to retirement accounts the borrower can fully access, plus documented non-self-employed severance packages and lump-sum retirement distributions evidenced by a distribution letter or Form 1099-R. The Selling Guide lists as ineligible “non-employment-related assets (for example, stock options, non-vested restricted stock, lawsuits, lottery winnings, sale of real estate, inheritance, and divorce proceeds).” It also states that checking and savings accounts are generally not eligible unless the balance itself came from an eligible employment-related asset. Virtual currency is not eligible.

Read that list against the profiles above and a gap appears. A borrower who just sold a business and holds the proceeds in a money market account does not fit Fannie Mae’s employment-related definition, because sale proceeds are not employment-related and the cash balance is not sourced from a severance or a lump-sum retirement distribution. That borrower is a Freddie Mac or non-QM candidate from the start.

Freddie Mac’s Section 5307.1 covers a wider set of accounts, including retirement assets, depository accounts, and securities. The tightest condition attaches to the second and third categories: at least one borrower who is an account owner must be at least 62 years old for depository accounts and securities to count. Cryptocurrency is excluded outright, a point Freddie Mac repeats in its Loan Product Advisor Documentation Matrix.

Non-QM programs apply their own haircuts by asset class, and those are alive and well. Published matrices commonly count checking and savings at full value, marketable securities at a reduced percentage, and retirement accounts lower still, with the reduction easing once the borrower is past retirement age. Two lenders quoting you “60-month asset utilization” can still produce different numbers because their haircut tables differ.

Retirement accounts and the age 59 1/2 problem

Retirement money carries a condition ordinary savings does not: the lender has to satisfy itself you can actually get at it.

Fannie Mae’s test is access, not age. The borrower must have, at the time of calculation, the unqualified and unlimited right to request a distribution of all funds in the 401(k), IRA, SEP, or Keogh, regardless of any tax withholding or penalty that would apply. If a penalty would apply, the amount of that penalty on a complete distribution is subtracted before the division. The Selling Guide’s own worked example runs a $500,000 IRA down to $350,000 of net documented assets after a $50,000 penalty and $100,000 of funds needed to close, producing $972.22 a month over 360 months.

Freddie Mac’s test is stricter on this point. Its retirement-asset conditions require that as of the note date the borrower can withdraw the funds in their entirety without being subject to a penalty, along with sole ownership, full vesting, and the account not already being used as a source of income.

Age is where those two tests quietly converge, because of the tax code sitting underneath both. The IRS applies a 10% additional tax to most early distributions from a qualified retirement plan or traditional IRA taken before age 59 1/2, subject to a list of exceptions. Under Fannie Mae’s approach a borrower under that age can still use the account, with the 10% coming off the top. Under Freddie Mac’s penalty-free condition, the same borrower generally cannot use it at all. The half-birthday is not written into either guideline as an eligibility rule, and it still changes the answer.

Asset depletion vs a bank statement loan

Both products exist because tax returns understate certain borrowers. They measure opposite things.

A borrower with an operating business and a modest balance sheet takes the deposit route. A borrower with a large balance sheet and no current revenue takes the asset route. Some files qualify on both, and a few programs allow the two to be combined with other documented income, which is worth asking about rather than assuming. If the collateral is a rental rather than a residence, neither is the likely answer and a DSCR loan usually is; the comparison of DSCR against personal-income underwriting covers where that line falls.

How to prepare an asset depletion file well

The preparation work is almost entirely inventory, and the borrowers who move fastest do it before the first conversation rather than after the first document request.

Write down every account before you talk to anyone. Institution, account type, owner, current balance. That list is your asset and liability schedule, and it determines which programs are even open to you. A file that is 80% retirement money is a different conversation than one that is 80% taxable brokerage.

Stop moving money between your own accounts. Programs commonly require asset seasoning and source-of-funds documentation for large deposits, and a transfer you make for tidiness in month one becomes a document request in month three. Freddie Mac, for instance, requires the seller to document the source of any deposit exceeding 10% of total eligible assets in depository and securities accounts.

Pull the access documentation for retirement accounts early. Both agency programs turn on whether you can take a full distribution, and a plan summary confirming that is a slower document to get than a statement.

Reconcile your summary to the statements you hand over. The underwriter is comparing your numbers to the account statements line by line. When those agree, the review is short. Real-estate holdings get their own treatment on top of this; if you own property, expect a schedule of real estate owned alongside the asset list.

Ask for the divisor and the haircut table in the same sentence. Those two facts determine your qualifying income. Everything else in the program is secondary.

StatementsReady builds the personal financial statement that carries this inventory. It is document preparation software, not a lender: we do not originate loans, underwrite files, make lending decisions, or pull credit. What it does is get the asset schedule accurate and presentable, so the number you hand a lender is the number they can verify. If you are gathering accounts for a file like this, the personal financial statement template and the net worth calculator are the fastest way to see the whole picture at once. Retirees running this exercise for the first time may find the retiree financial statement walkthrough a closer fit, and self-employed borrowers should start with the self-employed personal financial statement guide.

More on how lenders read borrower documents is in Business Lending, and the balance-sheet fundamentals sit under Personal Finance.