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Asset Depletion Formula:
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The Asset Depletion Calculator estimates monthly income based on a borrower's liquid assets minus required reserves, following Fannie Mae's guidelines for residential mortgage qualification.
The calculator uses the Fannie Mae asset depletion formula:
Where:
Explanation: This calculation determines the monthly income that can be derived from a borrower's liquid assets after setting aside required reserves.
Details: Asset depletion income is used by lenders to qualify borrowers who may not have sufficient traditional income but have significant liquid assets. This method helps demonstrate the borrower's ability to make mortgage payments.
Tips: Enter total liquid assets and required reserves in dollars. Both values must be non-negative numbers. The calculator will compute the monthly qualifying income.
Q1: What types of assets are considered in this calculation?
A: Typically includes liquid assets such as cash, savings, investments, and retirement accounts that can be easily converted to cash.
Q2: How are reserves determined?
A: Reserves typically include required funds for mortgage payments, taxes, insurance, and other obligations, usually calculated for a specific number of months.
Q3: Why is 360 used as the divisor?
A: 360 represents 30 years of monthly mortgage payments (30 years × 12 months), which is the standard timeframe used in asset depletion calculations.
Q4: Can this calculation be used for all loan types?
A: This specific formula follows Fannie Mae guidelines for conventional residential mortgages. Other loan programs may have different requirements.
Q5: How accurate is this income calculation for qualification purposes?
A: While this provides an estimate, final qualification depends on the lender's complete underwriting process including credit history, debt-to-income ratios, and other factors.