Obtaining a mortgage or other loans can be difficult for individuals who earn a majority of their income through various assets. In addition to a stated income loan, there are other options for individuals whose investments account for a substantial percentage of their income.
Retirement Funds
Two major loan providers, Fannie Mae and Freddie Mac, are willing to take into consideration retirement funds like IRAs and 401(k)s when it comes to providing a loan. This flexibility allows loan applicants a greater opportunity to qualify for a loan. Naturally, these loan providers will not consider the entirety of such assets in their assessment; they will only count 70% of these assets, minus requirements for closing costs and down payments, and divide the remainder by 360 months to determine the monthly amount an individual could pay. Using this formula, loan providers can offer a loan without even considering an individual’s actual income. Additional sources such as pensions, alternative assets, and Social Security can also be considered in determining the loan amount.
This method of obtaining an asset-based mortgage is often best used for smaller loans. If an individual requires a loan to account for the gap in proceeds from a home sale and the cost of a new home, for instance, such a method would be productive in obtaining a small mortgage.
Asset Depletion Loans
Known by other names like “asset utilization loans” and “no income, high asset loans,” asset depletion loans are ideal for individuals who earn their money through investments. Liquid accounts can often be used in full to determine the maximum loan account, but the eligibility of certain assets may vary depending on the lender. Credit score may be influential in determining an individual’s ability to secure a loan, as well. With an asset depletion loan, individuals may include various assets such as bank accounts, stocks, investment properties, retirement accounts, and certificates of deposit for consideration, but it is important for individuals to acknowledge that these assets may not be considered at the same percentage.
Being employed is not a requirement for obtaining a mortgage. If an individual earns most of their income through investments, they can use the value of these accounts to secure a mortgage or other loan. Regardless of current financial status, asset-based mortgages allow individuals to account for their existing wealth and obtain necessary loans.