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Asset Depletion Loans in Paradise
Paradise homebuyers with substantial savings but non-traditional income streams face unique financing challenges. Asset depletion loans solve this by converting liquid assets into qualifying income.
This approach works well for retirees, investors, and business owners in Butte County who have built wealth but don't show traditional W-2 income. Your bank accounts and investment portfolios become your proof of ability to pay.
Asset-based qualification removes the documentation burden of tax returns and pay stubs. Lenders calculate monthly income by dividing your liquid assets by a set number of months, typically 60 to 360.
Borrowers typically need $500,000 to several million in liquid assets to qualify effectively. These include savings accounts, stocks, bonds, mutual funds, and retirement accounts like IRAs and 401(k)s.
Credit scores usually range from 620 to 680 minimum, depending on the lender and loan amount. Down payments start at 20% for primary residences and increase for investment properties.
Lenders divide your total liquid assets by a specified term to calculate monthly income. A borrower with $1.2 million in assets divided by 60 months shows $20,000 monthly qualifying income.
Asset depletion loans come from non-QM lenders specializing in alternative documentation programs. These lenders understand that traditional income verification doesn't work for every qualified borrower.
Each lender uses different asset depletion formulas and acceptable asset types. Some allow 70% of retirement account values while others permit 100% of liquid accounts. Shopping multiple lenders reveals significantly different qualifying amounts.
Interest rates typically run 1% to 3% above conventional loan rates. Rates vary by borrower profile and market conditions, with stronger credit and larger down payments earning better pricing.
Many Paradise borrowers sit on substantial assets from business sales, inheritances, or decades of saving but struggle with traditional mortgage applications. Asset depletion converts that wealth into borrowing power.
Work with a broker who maintains relationships with multiple non-QM lenders. Different lenders accept different asset types and use varying depletion schedules, creating opportunities to maximize your qualifying income.
Document your assets thoroughly with recent statements covering all accounts. Lenders typically average balances over 60 to 90 days, so avoid large deposits or withdrawals during the application period unless you can source them clearly.
Consider whether depleting assets for qualification makes sense long-term. These loans work best when you have sufficient reserves beyond what's needed for qualification.
Bank statement loans might work better if you're self-employed with business revenue flowing through your accounts. They qualify you based on deposits rather than asset balances.
DSCR loans suit investors focused purely on rental property cash flow. Instead of personal income or assets, the property's rental income determines approval.
1099 loans serve independent contractors with consistent contract income. If you receive regular 1099 payments, this documentation might be simpler than asset depletion.
Asset depletion shines when you have substantial savings but minimal ongoing income. It's particularly valuable for early retirees and those living off investment returns.
Paradise's recovery from the 2018 Camp Fire brings unique homebuying dynamics. Many residents received substantial insurance settlements or buyouts, creating significant liquid assets without corresponding employment income.
The rebuilding community attracts retirees and remote workers who may not fit traditional lending criteria. Asset depletion loans provide financing options for these qualified buyers with non-traditional income profiles.
Butte County's lower property values compared to California's coastal markets make asset depletion loans more accessible. The same $1 million in assets qualifies for larger loan amounts in Paradise than in expensive metro areas.
Savings accounts, checking accounts, stocks, bonds, mutual funds, and money market accounts fully qualify. Most lenders accept 60-70% of IRA and 401(k) balances. Real estate equity typically doesn't count.
Lenders divide your total liquid assets by a set number of months, usually 60 to 360 months. A 60-month term means $600,000 in assets creates $10,000 monthly qualifying income.
Yes, insurance proceeds from the Camp Fire or other events count as liquid assets once deposited and seasoned in your accounts. Lenders verify the source through settlement documentation.
Primary residences typically require 20-25% down, while investment properties need 25-30%. Larger down payments often unlock better rates and more flexible terms from lenders.
Rates typically run 1-3% higher than conventional loans. Rates vary by borrower profile and market conditions, with your credit score, down payment, and asset levels affecting the final rate.
Mortgage financing for independent contractors and freelancers who earn 1099 income instead of traditional W-2 wages.
Non-QM loans that use 12 to 24 months of bank statements to verify income for self-employed borrowers.
Short-term financing that bridges the gap between buying a new property and selling an existing one.
Debt Service Coverage Ratio loans that qualify investors based on a rental property's income rather than personal income.
Mortgage programs designed for non-US citizens and non-permanent residents who want to purchase property in the United States.
Asset-based short-term loans primarily used by real estate investors for property acquisition and renovation projects.
Mortgages that allow borrowers to pay only the interest for an initial period, resulting in lower monthly payments upfront.
Financing solutions tailored for real estate investors purchasing rental properties, fix-and-flip projects, or investment portfolios.
Home loans for borrowers who have an Individual Taxpayer Identification Number instead of a Social Security number.
Adjustable rate mortgages held in a lender's portfolio rather than sold on the secondary market, offering more flexible terms.
Non-QM mortgages that use a CPA-prepared profit and loss statement to verify income for self-employed borrowers.
Home loans with interest rates that adjust periodically based on market conditions after an initial fixed-rate period.
Specialized mortgage programs designed to support homeownership in underserved communities with flexible qualification criteria.
Mortgages that meet the guidelines and loan limits set by Fannie Mae and Freddie Mac for secondary market purchase.
Financing for building a new home or making major renovations, typically converting to a permanent mortgage upon completion.
Traditional mortgage financing not backed by a government agency, offering flexible terms and competitive rates for qualified borrowers.
Innovative loan products that leverage projected home equity growth to provide favorable financing terms.
Government-insured mortgages from the Federal Housing Administration with low down payments and flexible credit requirements.
A revolving line of credit secured by your home equity that allows you to borrow funds as needed during a draw period.
A fixed-rate second mortgage that provides a lump sum of cash by borrowing against the equity built in your home.
Mortgages that exceed the conforming loan limits set by the FHFA, designed for financing high-value luxury properties.
Loans for homeowners aged 62 and older that convert home equity into cash without requiring monthly mortgage payments.
Government-backed zero down payment mortgages for eligible rural and suburban homebuyers who meet income limits.
Government-guaranteed mortgages for eligible veterans, active-duty service members, and surviving spouses with zero down payment.