Case Study: Retiree Uses Asset Depletion Loan to Purchase Dream Home

The Borrower Profile

Name: Robert & Patricia K. (anonymized) Occupation: Retired Executives Loan Amount: $750,000 Property: Primary residence in Scottsdale, Arizona Credit Score: 745 Down Payment: 20% Liquid Assets: $2.1 million

The Challenge

Robert and Patricia had retired after successful careers in corporate management. Their combined Social Security income was only $48,000 annually—far below what conventional lenders would require to qualify for a $750,000 mortgage. However, they had substantial liquid assets ($2.1 million in savings and investments) and wanted to purchase their dream retirement home.

Conventional lenders would deny them based on income alone, despite their obvious financial strength. They needed a lender who would consider their substantial assets as qualifying income.

The Solution: Asset Depletion Loan

Asset depletion loans are designed for borrowers with significant liquid assets but limited income. Instead of just looking at income, lenders calculate how much monthly income the borrower could generate by "depleting" their assets over a set period (typically 30 years, matching the loan term).

Asset Depletion Calculation

• Calculation:
• Total liquid assets: $2,100,000
• Divided by 360 months (30 years): $5,833/month
• Less Social Security: $4,000/month
• Total qualifying income: $9,833/month

Debt-to-Income Calculation

*Note: Asset depletion loans typically allow higher DTI ratios (up to 60%) because assets provide additional security.*

The Application Process

Documentation Provided

1. Recent bank statements (3 months) showing liquid assets
2. Investment account statements (3 months) showing stocks, bonds, CDs
3. Social Security award letters confirming retirement income
4. Personal tax returns (2 years, for reference)
5. Credit report showing excellent payment history
6. Life insurance policy (optional but helpful)
7. Proof of funds for down payment

Timeline

• Day 1: Application submitted with asset documentation
• Day 5: Underwriter reviews and verifies all assets
• Day 8: Appraisal ordered
• Day 15: Appraisal received, clear to close conditions issued
• Day 20: All conditions satisfied
• Day 25: Loan closes

The Results

Loan Approved: $750,000 at 7.95% (30-year fixed) Monthly Payment: $5,600 (PITI + insurance) Asset Depletion Income: $5,833/month Social Security Income: $4,000/month Total Qualifying Income: $9,833/month

Why This Worked

1. Substantial liquid assets — $2.1 million provided strong security for the lender
2. Excellent credit — 745 score showed decades of responsible borrowing
3. Conservative asset calculation — Using 30-year depletion matched the loan term
4. Significant down payment — 20% down reduced lender risk
5. Life insurance — Robert and Patricia had life insurance that would pay off the mortgage if needed

Key Lessons for Retirees and High-Net-Worth Borrowers

Asset depletion can unlock financing. If you have substantial savings but limited income, asset depletion loans can help you qualify for mortgages you couldn't get through conventional channels.

Liquid assets are key. Only liquid assets (savings, investments, CDs) count. Real estate, retirement accounts (401k, IRA), and collectibles typically don't qualify.

Higher DTI ratios are acceptable. Asset depletion loans typically allow DTI up to 60% because the borrower's assets provide additional security.

Life insurance helps. Having life insurance that would pay off the mortgage is attractive to lenders and can improve your terms.

Maintain good credit. Robert and Patricia's 745 credit score was crucial. Even with substantial assets, poor credit could have resulted in denial or higher rates.

Next Steps

If you're retired or have substantial liquid assets but limited income, explore asset depletion loans as an option for purchasing your dream home.