Asset Only Loans
What is an Asset Only Home Loan?
If you're a homebuyer who cannot meet conventional loan guidelines but have substantial assets that can be liquidated without restriction, then an Asset Only Home Loan may be the ideal product for you. Unlike a traditional mortgage, it allows borrowers to qualify based on their liquid assets rather than monthly income. The asset based financing is a secured loan that uses your personal assets as collateral. When applying for this mortgage, borrowers are not required to provide tax returns, paystubs or w2's. This type of mortgage is ideal for individuals who struggle to demonstrate consistent monthly income but possess substantial asset balances. This may include:
High net worth individuals with significant assets
Retirees living off of savings
Business owners with fluctuating monthly cash flow
Here are some of the more commonly used assets:
Checking or Savings accounts
Certificates of Deposit (CD)
Money market accounts
Investment accounts, including stocks, bonds and mutual funds
Retirement accounts such as 401k, 403b or IRA's
These assets refer to funds that can be liquidated (converted to cash or cash equivalents) within 30 days. Qualified purchasers may be able to borrow up to 90%* of the property's value on a purchase and 80%* of the property's value as a cash out refinance. Although no monthly income is necessary for eligibility, the loan file must show evidence of the borrower's "ability to repay".
How do I qualify for a Asset Only Home Loan?
In order to qualify for an Asset Only Mortgage on a primary residence, you will need to have a good credit history, a middle credit score over 680 and be able to demonstrate that you can afford the monthly repayments. Because there is no debt-to-income ratio for this program, borrowers' post-close assets must total one of the three criteria below.
Mortgage Only Method- Your post-closing assets must equal 125% of all outstanding mortgage debt for which you are personally liable. Any mortgage debt which an applicant can document as "business debt" may be omitted from this calculation.
Simplified Method- Your post-closing assets must equal 120% of the loan amount on the subject property plus 30% of all other outstanding debt (mortgage and consumer).
Traditional Method- Your total post-closing assets must equal 100% of the sum of the loan amount, closing costs and prepaid items . Eligible borrowers must also maintain 60 months of all recurring monthly debt multiplied by 60 months as "reserves".
What are the benefits of an Asset Only Home Loan?
Asset only loans are gaining popularity, and for a good reason. These loans offer a unique opportunity to make an offer on a property without having to sell all your assets. The beauty of asset only or asset depletion loan programs is that they allow you to use your retirement income and other assets to qualify for a mortgage loan. This program is specifically designed for those who have significant and verifiable assets, making it a great option for both homebuyers and those looking to refinance. Your approved loan amount and monthly mortgage payments are determined by the amount of assets you have.
One of the primary advantages of asset-based financing is that you can qualify even if you have limited or no verifiable monthly income. Many people with limited income have sizeable assets in various accounts. With this program, you can use your assets to qualify for a mortgage, even if your verifiable monthly income is small.
If you have limited income, asset-based financing can provide a great solution by generating an income stream from your assets.
Are there any drawbacks to an Asset Only Home Loan?
The main drawback of an Asset Only Mortgage is that you will need to have a good credit history and substantial assets to be able to afford the monthly repayments. Typically, the rate on these mortgages is slightly higher as well. It is also important to remember that the value of your assets may go down over time if you’re using those assets to satisfy monthly payments.
Make sure you speak to a qualified mortgage advisor such as Onshore Mortgage to find out if this type of loan is right for you.
*Credit and income restrictions do apply. Please visit our Disclosures page for a detailed breakdown of all loan types.