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Using Your Assets to Qualify for a Loan | Asset Depletion Mortgage

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An asset utilization loan may very well blow your mind.  Ever heard of it?  While it may be new to you, this type of loan has been around for some time.  

Here at A Nightmare on Loan Street Blog, we try to get you the very latest on borrowing.  At times, we leverage situations in lending that might sound like a train wreck and provide information on potential solutions.  

Today’s blog post is centered on the asset utilization loan.  I’m a big fan of three letter acronyms, but after hours of extensive research, I didn’t find any references to AUL for the asset utilization loan.  Kind of a bummer.  I suppose that will make me a trailblazer by starting AUL.

Anyway, an asset depletion loan uses a borrower’s assets (investments, properties, accounts, etc…) as the basis to qualify for a loan.  If you’re thinking “so I don’t need income?”, then the answer is absolutely not.  It’s true that a borrower could list both assets and income on the application (which would likely be stronger than assets alone), but listing income is not required.   

Asset utilization loans are very helpful for those who either don’t have regular income like small business owners, entrepreneurs, and commission-based sales reps.  These folks don’t receive a steady paycheck, which can complicate things when it comes time to purchase a home and get a mortgage from a big bank.  

The other thing that makes asset utilization loans a good option for small business owners and entrepreneurs is that you don’t have to have perfect credit to get approved.  If you’ve ever tried to start your own business or go all-in on an idea, you’ll know that it doesn’t always work out the way you planned.  Fortune favors the bold, right?  Well, even if your credit report has a recent event or two, this won’t disqualify you for an asset utilization loan.  Lenders are looking for scores above 620, so don’t let a business opportunity that didn’t work out discourage you from this type of loan.

Asset utilization loans are also popular among recent retirees.  Think about it: they’ve been saving for retirement for years (even decades) and may have a significant amount of investments but no longer have a regular income.  An asset utilization loan may be the ideal choice for recent retirees given these dynamics.  

Regardless of who applies for an asset utilization loan, they have some important details that apply across the board:

  1. They use asset depletion that is structured in a way to be inversely proportional to the down payment amount.  For example, if the down payment is 20%, the borrower will need to have 2x the loan amount in assets after the down payment and closing costs.  If the down payment is 30%, the borrower will need to have 1.5x the loan amount in assets after the down payment and closing costs. 
  2. Loan amounts can go up to $10M.  We all know the housing market right now, so having an option for a quality loan with a high ceiling is helpful.
  3. Interest only (IO) options are available.  IO loans may be a good choice when looking for a way to minimize the monthly payment since the only cost is interest.
  4. Home types may vary: single family, condos, townhomes are all acceptable.  Unfortunately this type of loan cannot be used for investment properties - must be a primary or secondary home.

I think you’ll agree that after reading about AULs, it certainly provides a viable alternative if the borrower doesn't have a traditional paycheck but does have a lot of assets.  The asset utilization loan is broadly applicable to a variety of borrowers as well.  If you’re interested in learning more about asset utilization loans, please reach out to the experts at Truss Financial Group.  They’re ready and waiting to talk to you.

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