Asset Depletion Calculation Fannie Mae

Asset Depletion Formula:

\[ \text{Depletion} = \frac{\text{Assets}}{360} \]

Monthly Asset Depletion:

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1. What is Asset Depletion Calculation?

The Asset Depletion Calculation is a method used by Fannie Mae to determine qualifying income by dividing total liquid assets by 360 months (30 years). This approach helps lenders assess a borrower's ability to make mortgage payments using their asset base.

2. How Does the Calculator Work?

The calculator uses the Fannie Mae asset depletion formula:

\[ \text{Monthly Income} = \frac{\text{Total Liquid Assets}}{360} \]

Where:

Total Liquid Assets — Sum of all qualifying liquid assets ($)
360 — Represents 30 years (360 months) of depletion

Explanation: This calculation converts a borrower's liquid assets into equivalent monthly income for mortgage qualification purposes.

3. Importance of Asset Depletion

Details: Asset depletion is particularly important for self-employed borrowers, retirees, or those with significant assets but irregular income. It provides an alternative method to demonstrate repayment capacity.

4. Using the Calculator

Tips: Enter total liquid assets in dollars. Include cash, savings, investments, and other qualifying liquid assets as specified by Fannie Mae guidelines.

5. Frequently Asked Questions (FAQ)

Q1: What types of assets qualify for depletion calculation?
A: Typically includes cash, savings accounts, stocks, bonds, mutual funds, and other liquid investments. Retirement accounts may have specific rules.

Q2: Why is the divisor 360 months?
A: Fannie Mae uses 360 months (30 years) as a standard depletion period for mortgage qualification purposes.

Q3: Are there minimum asset requirements?
A: Yes, lenders typically require sufficient assets to cover the depletion amount plus reserves after down payment and closing costs.

Q4: How does asset depletion differ from income qualification?
A: Asset depletion provides an alternative qualification method for borrowers who may not meet traditional income requirements but have substantial liquid assets.

Q5: Can asset depletion be combined with other income?
A: Yes, in many cases, asset depletion income can be added to other verifiable income sources to meet qualification requirements.