Orange County FHA, VA & First Time Buyer Loan Information: How an Asset Depletion Loan Benefits Wealthy Orange County Homebuyers

My goal is to provide valuable information for home buyers, both First Time Buyers and Move Up Buyers. This information will be about loan programs such as FHA ,VA, Conventional Fannie Mae and Freddie Mac, Reverse Mortgages, and even Portfolio Jumbo programs. I will also touch on tax advantages of homeownership, Rent vs. Own analysis, and any other aspect of loans and home ownership that will be of interest to Orange County home buyers and homeowners.

How an Asset Depletion Loan Benefits Wealthy Orange County Homebuyers

The Asset Depletion mortgage loan is a great program for helping wealthy Orange County, CA home buyers qualify for a loan despite not having "enough" verified income on their tax returns. Over the past few years homes in upper end communities of Orange County, like Newport Beach and Laguna Beach, have been effected negatively by a lack of financing options for Jumbo and "Super Jumbo" loans. There are now more "niche loan" programs being offered which are serving as a way for "makes sense" underwriting to prevail.

What! I Don't Qualify? I Have $5,000,000 in the Bank!

We've all heard of the wealthy borrower with $5,000,000 in their bank and investment accounts, but for one reason or another doesn't show enough income on their tax returns over the last two years to qualify for a $1,000,000 loan. Well, Asset Depletion qualifying to the rescue.

What is Asset Depletion Qualifying?

Asset Depletion qualifying is where is the niche portfolio lender will derive an income from the borrowers assets and add it to their verifiable income from their tax returns. For example, lets say John Smith, who is 45 years old, wants to purchase a home on Lido Island. He needs a $1,000,000 loan to complete the transaction, but only shows $100,000 a year income on his tax returns. But he has $2,000,000 in his investment accounts that for one reason or another he does not want to withdraw. He may be trying to avoid capital gains or some other penalty for early withdrawal, or expects his investments to appreciate significantly. The lender will amortize his $2,000,000 over 30 years assuming a 5% return. This results in "income" of $10,736, which is added to his verifiable income of $8,333 a month. He now qualifies!

What Assets are Acceptable for Asset Depletion?

  • Cash or cash equivalent
  • Money market accounts, savings accounts, checking accounts.
  • Trust Funds
  • Investment portfolio's -stocks, bonds, mutual funds, etc
  • Retirement accounts - But only if the borrower is of retirement age (62).
  • Also, this can be used with a Pledged Asset Loan

Benefit of an Asset Depletion Mortgage for Seniors

For Orange County seniors this can offer an alternative to a Reverse Mortgage. Once the borrower is 62, retirement accounts such as 401k's and IRA's are counted towards the borrowers "liquidable" assets. Also, the amortization period used by the lender in determining the derived income is shorter. The lender will subtract the borrowers age from 85 to determine the amortization period. For example, a 75 year old with $2,000,000 in "liquidable" assets would use an amortization period of 15 years and 5% to determine additional income. That comes to $21,213 in monthly income. A 65 year old would have an additional $13,199 added to their income for qualifying. (20 years, 5%) The lender will never amortize for greater that 30 years or less than 10 years.

Other Niche Loan Programs for Orange County Home Buyers

The Asset Depletion loan can be used in conjunction with other niche loan programs, like the Pledged Asset loan or loans for Foreign Nationals. The first step is to consult with a Orange County Jumbo Loan Expert who can discuss qualifications and prepare custom loan scenarios. As more niche loan program's are introduced, expect to see high end property values recover some of their losses from the past few years.

Authored by Tim Storm, an Orange County, CA Jumbo Mortgage Loan Officer MLO 223456– Please contact my office at Home Point Financial for more information about an Orange County, CA Jumbo Mortgage. 949-829-1846.

Contact us for your Orange County Jumbo Mortgage:

949-829-1846 | tstorm (at)


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Comment balloon 3 commentsTim Storm • May 05 2011 02:00PM


Curious about your Asset Depletion loan and if it will work on an existing home with roughly $1,000,000 of equity?

Posted by Ron almost 8 years ago

Tim ... I like your post here about Asset Depletion home loan qualifying, which is for rich people with insufficient income, to determine buyer income in part from his/her assets and add to verifiable income.  We used that for a buyer client several years ago, and it worked out OK.

Posted by Harrison K. Long, REALTOR , GRI, Broker associate, Attorney (HomeSmart, Evergreen Realty) almost 8 years ago

Ron - Asset Depletion will work on a refinance and is a great way to pull cash out. It can be combined with a Pledged Asset loan as well. 

Harrison - Asset Depletion and Pledged Asset programs will be more widely used in the next 12 months. Other portfolio programs, like Cross Collateralization program will help those with lots of equity in their current home that are trying to purchase a new home.

Posted by Tim Storm, Orange County FHA and VA Home Loan Specialist (Fairway Independent Mortgage Corporation) almost 8 years ago