55+ Communities · Asset Depletion
Buying in a 55+ community? Your assets, not a paycheck, may qualify you
You don’t have to sell your investments. The lender looks at your assets and calculates what they may count as income.
You spent decades building your savings. If you are ready for a 55+ community, your assets may be what we look at, not a paycheck. Here is how assets for income works, in plain English.
- Florida-licensed
- NMLS #2664300
- Smart Home Loans NMLS #1734077
You have spent decades building your savings and investments. Now you are ready for a 55+ community, and the last thing you want to do is cash out the portfolio you worked so hard for.
Here is the good news: with an option called assets for income, you don’t have to sell your investments to qualify. The lender looks at your eligible assets and calculates what they may count as qualifying income. Income from W-2 employment isn’t required for this option when your assets qualify.
Assets for income, in plain English
Most mortgage guidelines were written around a W-2 paycheck. If you are retired, semi-retired or living off your portfolio, your income may not show up the way a lender expects, even when your finances are strong. Assets for income, also called asset depletion, is built for that situation.
- You don’t have to sell your investments to qualify.
- You don’t have to draw income from them either. The lender looks at the assets and calculates what they may count as income.
- Social Security and other income, such as a pension, may be combined with it, depending on the lender and your profile.
How it works
The lender takes your eligible assets, subtracts the money needed for your down payment, closing costs and reserves, and divides what is left by a set number of months. The result may count as monthly qualifying income. Your assets stay where they are.
A non-QM illustration (example only, not an offer or a quote)
- Eligible assets: $1,200,000
- Less down payment, closing costs and reserves: $300,000
- Remaining: $900,000
- Divided by 60 months (an example divisor for a non-QM program): $15,000 a month that may count as qualifying income
- Agency-style programs generally divide by a much longer period, such as the loan term, so the monthly figure is lower.
This is a non-QM illustration. Other programs divide differently, and the result can be much lower than this example. The number of months varies by program and lender, and your numbers and result will be different.
What about capital gains and taxes?
Because you don’t have to sell your investments to qualify, the loan itself doesn’t trigger a sale of them. Your overall tax situation is your own, though, and selling investments for any reason, such as funding a down payment, can have tax effects. Please talk with your tax advisor. I can’t give tax advice.
What assets may count
Depending on the program and lender, these may be considered:
- Retirement accounts, such as a 401(k) or IRA
- Brokerage accounts and securities
- Savings and checking
Which of these count depends on the program: some count mainly retirement assets, others also count bank accounts and investments. Some assets may be limited or discounted depending on type. Lenders may also look at how long the money has been in the account and at big balance changes. Gift funds and borrowed funds do not count.
What still applies
Assets for income is not a shortcut. Programs and eligibility depend on the lender and your profile. You still need:
- A meaningful down payment (the amount depends on the program)
- Credit review, an appraisal and full documentation
- Assets that remain available and are not pledged to something else
It is generally used for a purchase (or sometimes a limited refinance), for a primary or second home, depending on the program.
Things to know about 55+ communities
The community itself matters as much as your finances:
- HOA dues are counted when a lender looks at your monthly obligations.
- Age and rental rules may apply, and they differ from one community to the next.
- The association has to meet the lender’s review. Some do not, and that may move your loan to a different lender program.
- HOA questionnaires and approvals can add time, so it helps to start early.
- Transfer or capital contribution fees may apply.
Before you fall in love with a community, send me the name. I can help you find out what the lender is likely to ask.
Questions people ask me
Straight answers. Programs and guidelines change, and everything depends on the lender, the program and your situation.
Do I have to sell my investments to qualify?
Not to qualify. With assets for income, you don’t have to sell your investments to qualify, and you don’t have to draw income from them. The lender looks at your eligible assets and calculates what they may count as qualifying income. Funds for your down payment, closing costs and reserves still have to come from somewhere, and I will walk through that with you.
Do I need a paycheck or W-2 income?
Income from W-2 employment isn’t required for this option when your assets qualify. The lender looks at your assets to calculate qualifying income. Credit, a down payment, an appraisal and full documentation still apply.
Can I combine Social Security with it?
Yes, it may be possible. Social Security and other income, such as a pension, may be combined with the income calculated from your assets, depending on the lender and your profile.
What about capital gains and taxes?
Because you don’t have to sell your investments to qualify, the loan itself doesn’t trigger a sale of them. Your overall tax situation is your own, though, and selling investments for any reason, such as funding a down payment, can have tax effects. Please talk with your tax advisor. I can’t give tax advice.
Does every lender offer this?
No. Some conventional and non-QM programs use it, and the rules differ. Ask me which lender may fit your situation.
Which assets may count?
Retirement accounts, brokerage accounts and savings may count, depending on the program. Some programs count mainly retirement assets, others also count bank accounts and investments. Some are limited or discounted, and gift or borrowed funds do not count.
Can I use this for a second home in a 55+ community?
Possibly. Primary and second homes may be allowed, depending on the program and the community’s rules.
Will I still need a down payment?
Yes. A meaningful down payment is usually needed, depending on the program.
Let’s talk it through
If a 55+ community is on your list, I would be glad to look at your assets and tell you where you stand. No pressure.
Honest answer: if a loan won’t work I’ll tell you. But not without trying.
Smart Home Loans NMLS #1734077 · Darryn Stephen NMLS #2664300 · Equal Housing Opportunity. Not a commitment to lend. Programs, terms and eligibility depend on the lender and the borrower’s profile. The example above is for illustration only and is not a quote, an offer or a guarantee of approval. This is general information, not tax or legal advice. Talk with your tax advisor about your situation.
Let’s talk it through
No pressure, just clear answers about what may fit you. Call, text or email me.
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