Visit Selling and Servicing Guide Communications and Forms. This program provides a way for mortgage lenders to calculate a borrowers ability to repay a loan based on their total liquid assets rather than their income. (For example, B3-2-02, DU Validation Service B3-3.1-09, Other Sources of Income B3-4.2-01, Verification of Deposits and Assets B3-4.2-05, Foreign Assets (formerly Verification of Assets for Non-US Citizen Borrowers) Community seconds providers . Fannie Mae applications are currently compatible with computers that run on the Microsoft Windows 8.1 Enterprise . Have you ever considered using your assets to qualify for a loan? 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. shelleyt31@gmail.com. B3-6-05, Monthly Debt Obligations. These alternative underwriting methods allow borrowers to use their liquid and non-liquid assets to qualify for a mortgage, even if their income falls short of traditional lending requirements. This information is provided to assist lenders in determining whether additional amount to qualify the borrower. be conducted to determine if any variable income should be used, but in no instance The lender must obtain copies of the borrowers signed federal income tax returns Download the Guide. employees who operate snow plows in winter, package delivery service workers who work However, borrowers who do not meet the eligibility requirements for these loans may use intentional dissipation as a way to qualify for them. When it comes to eligibility requirements for asset depletion mortgage loans, borrowers need to have significant assets to qualify. Borrowers need to provide asset documentation, such as IRA account statements, and get pre-approved for the mortgage. Lending Standards for Asset Dissipation Underwriting. 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. & Technology, News & Borrowers need to provide documentation of their assets, such as IRA account statements. Estate Asset. borrower by adding an amount equivalent to 25% of the nontaxable income to the borrowers Note that for DU loan casefiles, only the most recent year for example due to pending retirement or a new job, the lender must use the lower Having Issues with Seeing this Page Correctly? A Fannie Mae Asset Depletion Mortgage is a type of mortgage program designed for borrowers who have significant assets but little or no traditional income to qualify for a mortgage. Borrowers need to have a minimum asset value and a debt-to-income ratio that meets the program requirements. Its important to note that borrowers should be aware of the asset depletion income limits and the maximum loan amount they can qualify for based on their asset depletion calculation. Execution, Learning removed the requirement to reduce the value of retirement assets consisting of stocks, bonds, and mutual funds by 30% when measuring the three-year continuance for retirement income, and forcalculating net documented assets when employment-related assets are used as income. Federal National Mortgage Association Fannie Mae (LTS:0IL0) Average Interest Earning Assets (USD Mil) as of today (February 26, 2023) is 0.00. The lender must calculate the net equity outside of DU for a property marked Pending & Insights, Pricing & Fannie Mae was created in 1938 as the Federal National Mortgage Association (FNMA), a financial organization that was owned by the government. The Best Financial Books of All Time updated for 2022, Unlock Your Financial Potential with the Top 10 Best Finance Books for Beginners, The Best Financial Literacy Books To Read in 2023, The Best Money Books For Beginners You Must Read in 2023, Top Picks: The Best Financial Books for Young Adults (2023), The Best Personal Finance for Women Books (2023), Top Picks: The Best Personal Finance Books for College Students (2023), Top Picks: The Best Books About Personal Finance for Teens (2023), Top Picks: The Best Books on Real Estate Investing for 2023, The 11 Best Childrens Books About Money in 2022. Even for allowable assets, lenders wont necessarily count the whole amount toward your mortgage income.. Lets take a closer look at what borrowers can expect during this final step of the process. We've been listening to your feedback and are excited to share the newest version of the Single-Family Seller/Servicer Guide. You may use it as an additional income source on top of any regular income you currently receive. Virtual currency is not an eligible asset. are related to this topic. Additionally, the company announced a one-month extension to flexibilities that enable lenders to sell to Fannie Mae single . Get answers to your Selling Guide & policy questions with Fannie Mae's AI-powered search tool. Frequency of Payment: The lender must determine the frequency of the payment (weekly, biweekly, monthly, So, lets explore the calculation of asset depletion and how it factors into the underwriting process. asset backed loan. See the borrower will continue to be received by the borrower for the foreseeable future. DU will not require documentation of assets for refinance transactions when the total Some lenders may also offer asset depletion mortgage loans with different loan terms, such as 240 months or 180 months. the following sources of income or employment. 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. In this section, we will define asset depletion and explain why it is an essential consideration for mortgage lenders. If the trend in the amount of income is stable or increasing, the income amount should 3% of loan amount for primary residence. to time limits, such as contract employees or tradesmen. One important aspect of this process is asset depletion, which is a calculation used to determine a borrowers ability to repay a mortgage loan based on their liquid assets. wage earner in a similar tax bracket is more than 25% of the borrowers nontaxable Execution, Learning Additionally, working with a mortgage broker or financial advisor who specializes in asset depletion mortgages can also be helpful in finding a lender that offers these types of loans. Use the Sign Tool to create and add your electronic signature to signNow the Fannie make income worksheet form. Think about your current budget as well as your longer-term financial goals as you plan. When applying for an asset depletion mortgage loan, borrowers are required to provide documentation for all assets used in the calculation, such as bank statements and retirement account statements. Step 2 B. For example, borrowers may have overtime income that is cyclical (transportation In this section, well discuss the eligibility criteria and the necessary documentation borrowers must provide to qualify for an asset depletion mortgage loan. Dissipation can take various forms, such as excessive spending, gambling, substance abuse, or transferring assets to a third party without the other spouses knowledge or consent. Now that the borrower has successfully secured an asset depletion mortgage loan, its time to move forward with closing the loan. Our mortgage calculators 2 can help you get there. It helped provide continuous and steady funding for housing and introduced a new type of mortgage to the market: the long-term, fixed-rate loan with an option to refinance at any time. Additionally, borrowers who do not have traditional employment income may find it challenging to provide alternative documentation of their income or employment, which can impact their ability to qualify for the loan. if the appropriate documentation is provided. Borrowers need to have a minimum asset value that meets the program requirements. The exact calculations vary by lender which means its extra important to compare different mortgage lenders and find an asset depletion program that fits your needs. For certain high LTV refinance loans, lenders are not required to follow the income Form 91 may be used to analyze the Borrower's tax returns and calculate self-employed monthly gross income. Another strategy for overcoming hurdles in the asset depletion mortgage process is to explore alternative sources of income. Depository Assets. ), Bridge loans should also be considered in the net equity calculation for properties that are pending sale. The asset balance is divided by 360. What are the loan parameters to use employment-related assets as qualifying income? Remember, this is their total income not their maximum mortgage payment. In this section, we will discuss the underwriting process and other important considerations for borrowers seeking an asset depletion mortgage loan. The lender can guide them through the application process and help them understand the specific requirements for asset documentation and other eligibility criteria. By considering a borrowers total liquid assets, lenders can determine whether or not they have the means to make their mortgage payments. By taking the necessary steps and being proactive in the process, you can increase your chances of securing an asset depletion mortgage loan and achieving your homeownership goals. documentation requirements described in this Chapter. source (two years returns); uses interest and dividend income to qualify; uses tip income reported on IRS Form 4137 that was not reported by the employer on Self-Employment Income. For example, if a borrower has $1,000,000 in liquid assets and is applying for a 30-year mortgage loan, the asset depletion calculation would be $1,000,000 divided by 360 months, which equals $2,777.77 per month in asset depletion income. The annuity stream is added to the applicant's other income when evaluating the applicant's ability to make mortgage payments. With lower debt-to-income ratio requirements and the ability to use assets as income, borrowers can unlock the full potential of their financial toolbox and access a wider range of financing options. account statements, or any other documents that address the nontaxable status of the 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). By taking these steps, borrowers can increase their chances of qualifying for an asset depletion mortgage and secure the financing they need to purchase a home or refinance an existing mortgage. However, the Fannie Mae program may be more restrictive in terms of eligibility requirements, while the Freddie Mac program may be more lenient in allowing for higher debt-to-income ratios. If you have additional questions, Fannie Mae customers can visit Ask Poli to get Fannie Mae's underwriting guidelines emphasize the continuity of a borrower's stable income. predictable, and likely to continue. to prior years earnings using the borrowers W-2s or signed federal income tax returns Same as for a U.S. citizen. Net documented assets are equal to the sum of eligible assets minus: (a) the amount of the penalty that would apply if the account was completely distributed at the time of calculation; and. The borrowers assets are divided by the number of months in the loan term to determine their monthly income. income types see BRE License #: 01526821 | DBO License #: 603L284. 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. Lenders may also require additional documentation, such as a letter from a financial advisor, to verify the value of the assets. Overall, intentional dissipation is a controversial strategy that should be carefully considered before being used by borrowers. Asset & Income - Finicity Its important to note that significant assets that may not be liquid, such as real estate holdings, are not typically included in the asset depletion calculation. Execution, Learning That amount is used as your monthly income when qualifying. there are positive factors that reasonably offset the shorter income history. 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. However, it requires careful planning, documentation, and communication with lenders and underwriters. Additionally, proof of ownership of the assets may be necessary. feel free to email, two consecutive monthly bank statements (60 days of account activity) for all purchase Texas Cash-Out Allowed (Min Loan Amount $250K) 12- & 24-Month Bank Statement Income for Self-Employed. The lender can use any of the following types of documentation to verify that a borrower has sufficient funds for closing, down payment, and/or financial reserves: Request for Verification of Deposit ( Form 1006 or Form 1006 (S) ). This is particularly advantageous for retirees or individuals with substantial assets but limited traditional employment income. If you still have Technical Support questions, Higher interest rates and fees compared to traditional mortgages. 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. For information on U.S. citizens earning foreign income, refer to borrowers history of receipt, the frequency of payment, and the trending of the amount Ineligible assets are non-employment-related assets (for example, stock options, non-vested restricted stock, lawsuits, lottery winnings, sale of real estate, inheritance, and divorce proceeds). The stable and reliable flow of income is a key consideration in mortgage loan underwriting. Totally valid, and plausibly cheaper than the mortgage. How does it work? This program allows you to deplete your assets as a way to count that money as income for the duration of the loan. of tax returns may be required. What Do Asset Depletion Loans Offer? If the actual amount of federal and state taxes that would generally be paid by a If you have additional questions, Fannie Mae customers can visit Ask Poli to get Foreign assets . Fannie Mae and Freddie Mac: Basics. current period overtime and year-to-date earnings and document the analysis before that can be used for this verification includes award letters, policy agreements, Many of the larger banks offer asset depletion mortgages. This video helps you understand what an escrow account is and how it can make managing your home's property taxes and insurance premiums easier. For a comprehensive list of resources such as access forms, announcements, lender letters, notices and more. do not enter the amount of the loan both as a bridge loan and in a checking account, longer hours through the holidays). In this way, you can prove you have enough money to cover the loan even without regular income from employment. With Asset Dissipation Underwriting and Asset Depletion Mortgages, you can maximize your lending opportunities and achieve your dream of homeownership. Closing. Enter the amount of a bridge (or swing) loan in the asset section 2a of the loan application. Credit score. Some key factors that lenders consider when evaluating asset depletion include the type and liquidity of the assets, the estimated number of months the assets will last, and the borrowers credit score. B3-4.3-05, Gifts of Equity. that the borrower will not continue to be employed at the current level, the current, For a comprehensive list of resources such as access forms, announcements, lender letters, notices and more. to be used in the trending analysis (see below). analyzed to determine that both the current overtime earnings for the period and the value of the actual asset, and the net asset value should be entered. information about prior earnings. Apply a check mark to indicate the answer wherever expected. If their assets are sufficient to pay for the loan as well as regular living expenses they can qualify based solely on that calculation. Lenders dont just look at a borrowers assets when qualifying them for an asset depletion loan.