information from other Fannie Mae published sources. Max 85% LTV for Cash-Out. Both main borrower and all non-occupant co-borrowers need to meet Fannie Mae and/or Freddie Mac's mortgage lending guidelines with regards to credit, income, and debt to income ratios. Like a Freddie Mac Asset Depletion Mortgage, it allows borrowers to use their assets as a means of qualifying for a 30-year residential mortgage. quarterly, or annually) to arrive at an accurate calculation of the monthly income Unless the lender has knowledge to the contrary, if the income does not have a defined The Multifamily Asset Management Portal also allows you to request certain guideline modifications related to property inspection and financial submissions, as well as request data corrections directly within the application. business, such as non-recurring income and expenses, depreciation and depletion (if applicable). (b) the amount of funds used for down payment, closing costs, and required reserves. analyzed to determine that both the current overtime earnings for the period and the For a comprehensive list of resources such as access forms, announcements, lender letters, notices and more. These underwriting processes consider a borrowers assets, income, credit score, and other factors. Get answers to your Selling Guide & policy questions with Fannie Mae's AI-powered search tool. able to earn consistent and predictable income, are also considered to have a reliable The new rule per Freddie Mac Asset Depletion: A borrower may use 70% of the balance of an investment account and divide that number by 240 months. Depository Assets. Gifts and grants that are not deposited are not included in another asset account. In this way, you can prove you have enough money to cover the loan even without regular income from employment. account statements, or any other documents that address the nontaxable status of the Unrecorded assignments of B3-2-02, DU Validation Service. income types see The amount of the secured loan should be entered in Section 2b using the asset type If you have made it this far you probably appreciated the above article. Liquidity ratios. Asset depletion mortgages are asset-based, while traditional mortgages are income-based. If you still have Technical Support questions, may it be averaged over the period when the declination occurred. version of a page. Download the Guide. Lets dive deeper into the concept of asset depletion. This An asset depletion loan allows you to use your assets to qualify for a mortgage (instead of income), and does not require you to be employed. As a thank you, please help me by: Save my name, email, and website in this browser for the next time I comment. The following table contains examples of income types with and without defined expiration View and export this data going back to 2010. Ask Poli features exclusive Q&As and moreplus official Selling & Servicing Guide content. Note that you can do this for regular expenses as well, and in some cases you should (for ex: to defer a sale to move from st cap gains to lt cap gains) Just as a Swiss Army knife has multiple tools in one compact device, an asset depletion mortgage loan offers multiple benefits to borrowers in one streamlined package. Borrowers need to have a minimum asset value that meets the program requirements. Schedule F - Profit or Loss from Farming (Chapter 5304) Net Farm Profit or Loss (+/-) (+/-) Non-taxable portion of recurring cooperative and CCC payments (+) (+) This is just one example of how asset depletion underwriting can be an important tool for borrowers with significant assets but lower income. It is treated as a Texas Cash-Out Allowed (Min Loan Amount $250K) 12- & 24-Month Bank Statement Income for Self-Employed. Examples of less predictable income sources include from the net proceeds to avoid counting this asset twice.). The end result may be used as a qualifying monthly income. Even for allowable assets, lenders wont necessarily count the whole amount toward your mortgage income.. That amount is used as your monthly income when qualifying. Higher interest rates and fees compared to traditional mortgages. Try 12 Fun Money Saving Challenge!! It can have serious legal and financial consequences, including the affected spouse seeking to recover their share of the dissipated assets through negotiation or litigation. Do not include the amount of the bridge loan in any other liquid asset. This information is provided to assist lenders in determining whether additional * Conventional loans require that the applicant be 62 years of age in order to use liquid assets as income (asset depletion / asset annuitization). First, they should work with a knowledgeable lender who is experienced in offering asset depletion mortgage loans. as a recurring liability in the liabilities section of the loan application. If so, you may be interested in learning about Asset Dissipation Underwriting and Asset Depletion Mortgages. received by the borrower and the value should be included in another asset account. using the income amount in the trending analysis. Additional analysis must Now that we have a good understanding of asset depletion and how it works, lets talk about the importance of this concept in mortgage lending. Its also important to be aware of the asset depletion program guidelines and the maximum loan amount that can be obtained based on qualifying assets. A non-self-employed severance package or non-self-employed lump sum retirement package (a lump sum distribution) these funds must be documented with a distribution letter from the employer (Form 1099R) and deposited to a verified asset account. to time limits, such as contract employees or tradesmen. income. You want to strategically move your pieces in a way that maximizes your lending opportunities while minimizing your risks. Qualifying for an Asset Depletion Mortgage Loan. The documentation must be in compliance with the Allowable Age of Credit Documents policy (see B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns, for additional information). Now that the borrower has successfully secured an asset depletion mortgage loan, its time to move forward with closing the loan. Form 91 may be used to analyze the Borrower's tax returns and calculate self-employed monthly gross income. The documentation must be in compliance with the . Events, Cash Deposit on Sales Contract (Earnest Money), B3-4.3-06, Grants and Lender Contributions, How to do a hard refresh in Internet Explorer. Secondly, borrowers should be prepared to provide detailed documentation of their assets, including retirement funds, stocks, and other assets that can be used to calculate asset depletion income. Lease Agreement or Fannie Mae Form 1025 This method is used when the transaction is a purchase or the property was acquired subsequent to the most recent tax filing. Frequency of Payment: The lender must determine the frequency of the payment (weekly, biweekly, monthly, Asset depletion mortgage loans offer more financing options to borrowers, including home loans that use asset amortization or asset depletion underwriting. You have entered an incorrect email address! B3-4.3-06, Grants and Lender Contributions. In this section, we will dive deeper into the concept of asset depletion, discussing what it is and why it is important for both borrowers and lenders. Gifts and grants that are deposited have been Without asset depletion, these borrowers may not qualify for a mortgage loan despite their significant assets. (See To demonstrate the likelihood that a consistent level of income will continue to be . After taking out $10,000 for closing costs and dividing by 360, the. Freddie Mac Asset Depletion Mortgage Lending Guidelines GCA - Mortgage Bankers 4.57K subscribers Subscribe 1.8K views 3 years ago Freddie Mac Asset Depletion Mortgage Lending Guidelines Many of. So, lets explore the calculation of asset depletion and how it factors into the underwriting process. Perhaps it was because Fannie Mae requires no less than a 360 month period, or perhaps it was only to be more conservative from an underwriting standpoint.) ), Selling, Securitizing, and Delivering Loans, Section B3-3.1: Employment and Other Sources of Income, Research Events, Determining the Need for Federal Income Tax Returns, Verification of Income for Non-U.S. Citizen Borrowers, Using Nontaxable Income to Adjust the Borrowers Gross Income, Reduced Income Documentation Requirements for High LTV Refinance Loans, B3-3.1-06, Requirements and Uses of IRS IVES Request for Transcript of Tax Return Form 4506-C, Salaried or commissioned borrower employed by a U.S. company or individual. In addition, mortgage borrowers are not required to cash in their assets right away. Now that we understand the benefits of asset depletion mortgage loans, lets take a closer look at the eligibility requirements for borrowers who want to take advantage of this type of mortgage loan. We will explore the types of assets that are included in the calculation and how significant assets can impact a borrowers eligibility for a loan. borrowers history of receipt, the frequency of payment, and the trending of the amount See The lender must calculate the net equity outside of DU for a property marked Pending borrower by adding an amount equivalent to 25% of the nontaxable income to the borrowers Events, B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns. We were able to use asset depletion underwriting to calculate the borrowers assets and demonstrate that he had enough liquid assets to repay the mortgage loan, even with his low income. One of the common challenges when applying for asset depletion mortgage loans is finding a lender that offers this type of loan, as it is not widely available. Note: It may also be necessary to enter the bridge loan and corresponding monthly payment See Section B3-3.2, Self-Employment Income. Combined with the borrowers interest rate, this number will help determine what loan amount they qualify for and how high of a home price they can afford. available for closing. Its important to note that not every lender offers asset depletion mortgages, so its important to do your due diligence and research to find a lender that fits your needs. Access forms, announcements, lender letters, legal documents, and more to stay current on our selling policies. earnings reported on IRS Form 1099; receives income that cannot otherwise be verified by an independent and knowledgeable Can help borrowers with irregular income or no income qualify for a mortgage. The amount of the gift is included in available funds. Asset depletion is an important concept to understand when it comes to mortgage lending. I had a client who was a retiree and had a significant amount of assets in his retirement account. Its important for borrowers to have a clear understanding of the documentation requirements and to be prepared to provide all necessary documents to ensure a smooth application process. However, it requires careful planning, documentation, and communication with lenders and underwriters. be nontaxable, such as child support payments, Social Security benefits, workers However, with the help of an asset depletion loan program, borrowers can use their assets to qualify for a mortgage without traditional employment income. With an asset depletion mortgage, your monthly 'income' is calculated by dividing your total liquid assets by 360 months (the duration of most mortgage loans). What Do Asset Depletion Loans Offer? refinance transactions. How to do a hard refresh in Internet Explorer. Successful in leading underwriting teams, and training junior staff to handle . This reduces the amount they can spend on their mortgage each month. amount to qualify the borrower. Take a moment to read Robyn A. Friedman's "Age Is Just a NumberExcept When You're Applying for a Mortgage' in The Wall Street Journal. WASHINGTON, DC - May 19, 2020 - Fannie Mae (FNMA/OTCQB) today announced flexibilities for homeowners who have taken a forbearance due to a COVID-19 financial hardship to refinance their mortgage or buy a new home. Understanding asset depletion and its implications can be a key factor in maximizing mortgage lending opportunities. filed with the IRS for the past one or two years (depending on the income type) for B3-4.3-04, Personal Gifts, and However, borrowers who do not meet the eligibility requirements for these loans may use intentional dissipation as a way to qualify for them. Fannie Mae Executes its First Credit Insurance Risk Transfer Transaction of 2023 on $11.8 Billion of Single-Family Loans February 27, 2023 Fannie Mae Releases January 2023 Monthly Summary This strategy involves reducing the value of assets on paper, typically through nonessential spending or gifting, so that they fall within the eligibility requirements for the loan or mortgage. Money Saving Challenge Games: 23 Money Savings Challenge to Try in 2023! according to the requirements of Dynamic Leader Specializing in Mortgage Underwriting and Decision Quality Management. Do you have Trust assets with totally unrestricted use? By using their qualifying assets, borrowers can increase their chances of obtaining a mortgage loan and achieving their dream of homeownership. sources. received on March 31st by three months produces a much higher, inaccurate monthly average. Qualifying assets, income, credit score, and required reserves a recurring liability in the liabilities of! 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