Asset Depletion Calculator Fannie Mae Home

Asset Depletion Formula:

\[ Income = \frac{(Assets - Reserves)}{360} \]

Income (monthly income):

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1. What is the Asset Depletion Formula?

The Asset Depletion Formula calculates monthly income for Fannie Mae home qualification by dividing net assets (assets minus reserves) by 360. This method helps determine qualifying income when traditional income documentation is insufficient.

2. How Does the Calculator Work?

The calculator uses the Asset Depletion formula:

\[ Income = \frac{(Assets - Reserves)}{360} \]

Where:

\( Assets \) — Total assets in dollars
\( Reserves \) — Required reserves in dollars
\( 360 \) — Standard divisor representing 30 years (360 months)

Explanation: This formula calculates a monthly income stream based on liquid assets, assuming those assets could be drawn down over a 30-year period.

3. Importance of Asset Depletion Calculation

Details: Asset depletion income calculation is crucial for mortgage qualification, particularly for self-employed individuals, retirees, or those with significant assets but irregular income patterns.

4. Using the Calculator

Tips: Enter total assets and required reserves in dollars. Both values must be non-negative numbers. The calculator will compute the monthly qualifying income.

5. Frequently Asked Questions (FAQ)

Q1: What types of assets are considered in this calculation?
A: Typically includes liquid assets such as cash, stocks, bonds, and retirement accounts that can be readily converted to cash.

Q2: How are reserves determined?
A: Reserves typically include required cash reserves for mortgage payments, taxes, insurance, and other obligations as specified by lender guidelines.

Q3: Why is 360 used as the divisor?
A: 360 represents 30 years (360 months), which is a standard timeframe used by lenders for asset depletion calculations.

Q4: Are there limitations to asset depletion income?
A: Yes, lenders may have specific requirements about which assets qualify and may apply haircuts to certain asset types.

Q5: Is this calculation specific to Fannie Mae?
A: While this formula follows Fannie Mae guidelines, other lenders and agencies may have slightly different requirements for asset depletion calculations.