1. What is the Asset Depletion Calculator?

The Asset Depletion Calculator calculates monthly income based on Fannie Mae's asset depletion guidelines for tax purposes. 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:

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 by distributing net assets (assets minus reserves) over a 30-year period, as per Fannie Mae guidelines.

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. It helps lenders assess borrowing capacity based on liquid assets.

4. Using the Calculator

Tips: Enter total assets and required reserves in dollars. Assets must be greater than or equal to reserves. The calculator will compute the monthly qualifying income according to Fannie Mae guidelines.

5. Frequently Asked Questions (FAQ)

Q1: What types of assets can be included?
A: Typically includes liquid assets like cash, stocks, bonds, and retirement accounts. Real estate equity may be included in some cases but often has additional requirements.

Q2: How are reserves determined?
A: Reserves typically include required cash reserves for the mortgage plus additional funds for taxes, insurance, and living expenses, usually calculated as 6-12 months of expenses.

Q3: Why is the divisor 360?
A: The 360 divisor represents 30 years (360 months), which is the standard timeframe Fannie Mae uses to calculate monthly income from assets.

Q4: Are there age restrictions for using asset depletion?
A: Some lenders may have age restrictions or require additional documentation for older borrowers to ensure assets will last throughout the loan term.

Q5: Can asset depletion be combined with other income?
A: Yes, asset depletion income can often be combined with other documented income sources to qualify for a larger mortgage amount.