Asset Depletion Loans in Texas

Key Takeaways

• Asset depletion loans allow Texas borrowers to qualify based on their liquid assets rather than traditional income, ideal for retirees and high-net-worth individuals.
• Lenders typically divide your eligible assets by 360 months (30 years) to calculate a theoretical monthly income for mortgage qualification.
• Most Texas asset depletion programs require credit scores of 680+, down payments of 20-30%, and substantial liquid assets worth at least 1.5-2 times the loan amount.
• Eligible assets include checking/savings, investments, retirement accounts (often at reduced values), and cash-value life insurance, but exclude the value of your primary residence.
• Asset depletion loans typically have interest rates 0.5-1.5% higher than conventional mortgages, reflecting their non-traditional qualification method.

Understanding Asset Depletion Loans in Texas

What Are Asset Depletion Loans?

Asset depletion loans offer a unique mortgage qualification method that focuses on your accumulated wealth rather than your monthly income. Instead of using traditional income documentation like pay stubs or tax returns, these loans calculate a theoretical monthly income based on your liquid assets, allowing you to qualify for a mortgage even without significant regular income.

This innovative approach recognizes that many financially secure individuals—particularly retirees and high-net-worth professionals—may have substantial assets but limited monthly income. By considering these assets as a potential income stream, asset depletion loans create homeownership opportunities that might otherwise be unavailable through conventional financing.

In Texas, where retirement communities and luxury real estate markets continue to grow, asset depletion loans serve a crucial niche in the mortgage landscape. They provide financing solutions for affluent homebuyers in communities from Lakeway near Austin to The Woodlands near Houston, and upscale neighborhoods throughout Dallas-Fort Worth and San Antonio.

How Asset Depletion Qualification Works

The fundamental concept behind asset depletion loans is straightforward: lenders calculate a theoretical monthly income by dividing your eligible assets by a set number of months, typically 360 (representing a 30-year mortgage term).

Here's a simplified example:

• Total eligible assets: $1,500,000
• Divided by 360 months: $4,167 monthly income equivalent
• This $4,167 would be used as your "income" for debt-to-income calculations

Most Texas lenders use variations of this basic formula, with some applying discount factors to certain asset types or using shorter depletion periods for older borrowers. The resulting calculated income is then used in standard debt-to-income ratio calculations, typically with a maximum DTI of 43-50%.

This approach allows borrowers with significant assets but modest income to qualify for mortgages that would otherwise be unattainable. For example, a retired couple with $2 million in investment accounts but only $60,000 in annual pension and Social Security income might qualify for a substantially larger mortgage using asset depletion than they would using only their regular income.

Who Benefits from Asset Depletion Loans in Texas?

Asset depletion loans serve several distinct groups of Texas homebuyers:

Retirees and Near-Retirees:

Many retirees have accumulated substantial wealth in retirement accounts and investments but have relatively modest monthly income from Social Security and pensions. Asset depletion loans allow them to leverage their lifetime savings to finance a retirement home or downsize without liquidating investments prematurely.

High-Net-Worth Individuals:

Affluent professionals with significant assets but complex or irregular income streams benefit from asset depletion qualification. This includes entrepreneurs between ventures, investors with primarily capital gains income, and executives with compensation heavily weighted toward stock options or bonuses.

Self-Employed Professionals: Business owners and self-employed individuals who minimize taxable income through legitimate deductions often have substantial assets but show limited income on tax returns. Asset depletion provides an alternative qualification path that better reflects their true financial capacity.

Real Estate Investors: Experienced investors with significant liquid assets can use asset depletion loans to finance additional properties without being constrained by the income limitations of traditional mortgage qualification.

Recent Retirees: Those who have recently retired may have substantial assets but haven't established a long history of retirement income distributions. Asset depletion bridges this gap by recognizing their accumulated wealth.

The common thread among these borrowers is financial stability that isn't adequately captured by traditional income documentation. Asset depletion loans recognize that wealth can be as important as income in determining a borrower's ability to repay a mortgage.

Advantages Over Traditional Mortgage Qualification

Asset depletion loans offer several key advantages compared to traditional mortgage qualification methods:

Recognition of Wealth Beyond Income: While conventional loans focus almost exclusively on monthly income, asset depletion loans acknowledge that substantial assets can provide financial security even without high regular income.

Flexibility for Irregular Income: For those with variable or seasonal income, asset depletion provides stability in the qualification process by focusing on accumulated wealth rather than recent income history.

Tax Efficiency: Many high-net-worth individuals structure their finances to minimize taxable income. Asset depletion allows them to qualify based on their actual financial capacity rather than their tax-optimized income.

No Need to Liquidate Investments: Rather than selling investments to generate cash for a home purchase (potentially triggering capital gains taxes), borrowers can keep their investment strategy intact while still qualifying for a mortgage.

Strategic Withdrawal Planning: For retirees, asset depletion loans allow for more strategic planning of retirement account withdrawals rather than forcing larger distributions simply to qualify for a mortgage.

Simplified Documentation: Instead of extensive income verification spanning years of tax returns and employment history, asset depletion focuses primarily on documenting and verifying your current assets.

These advantages make asset depletion loans particularly valuable in Texas's diverse real estate markets, where traditional income qualification might not adequately serve the needs of affluent retirees, business owners, and investors.

Qualifying for an Asset Depletion Loan in Texas

Eligible Asset Types for Qualification

Asset depletion loans consider various types of liquid and semi-liquid assets, though lenders differ in how they value each asset category:

Fully Counted Assets (100% Value):

• Checking and savings accounts
• Certificates of deposit (CDs)
• Money market accounts
• Non-retirement investment accounts (stocks, bonds, mutual funds)
• Cash value of life insurance policies (accessible portion)

Partially Counted Assets (Typically 60-70% Value):

• 401(k) and 403(b) accounts
• Traditional and Roth IRAs
• SEP and SIMPLE IRAs
• Thrift Savings Plans (TSPs)
• Other qualified retirement accounts

Excluded Assets:

• Equity in real estate (including your primary residence)
• Business equity
• Personal property (vehicles, jewelry, art, collectibles)
• Restricted stock units (RSUs) that haven't vested
• Cryptocurrency (excluded by most lenders)
• Education savings accounts (529 plans, Coverdell ESAs)

The reduced valuation for retirement accounts reflects potential early withdrawal penalties and tax consequences. Some Texas lenders may apply different discount factors based on the borrower's age, with smaller discounts for borrowers closer to retirement age who can access funds with fewer penalties.

Credit and Down Payment Requirements

Asset depletion loans typically have stricter credit and down payment requirements than conventional mortgages:

Credit Score:

• Minimum score: 680-700 (varies by lender)
• Preferred score for best terms: 740+
• Clean credit history with no major derogatory events in the past 4-7 years
• Low credit utilization (ideally below 30% of available credit)

Down Payment:

• Primary residence: 20-30% minimum (some programs may accept 15% with very strong assets)
• Second homes: 25-35% minimum
• Investment properties: 30-40% minimum

Loan-to-Value (LTV) Ratio:

• Maximum 80% LTV for primary residences
• Maximum 75% LTV for second homes
• Maximum 70% LTV for investment properties

These more conservative requirements offset the non

Loan-to-Value (LTV) Ratio:

• Maximum 80% LTV for primary residences
• Maximum 75% LTV for second homes
• Maximum 70% LTV for investment properties

These more conservative requirements offset the non-traditional income verification method. Lenders want to ensure borrowers have significant equity in the property and strong credit profiles to mitigate the risk associated with asset-based qualification.

While these requirements are more stringent than those for conventional loans, they're generally more flexible than jumbo loan requirements, making asset depletion a good middle ground for affluent borrowers who don't fit conventional guidelines.

Asset-to-Loan Ratio Requirements

Most Texas lenders require that your eligible assets exceed your desired loan amount by a substantial margin:

Typical Asset Requirements:

• Minimum assets: 1.5-2.5 times the loan amount
• Example: For a $500,000 loan, you might need $750,000-$1,250,000 in eligible assets

This requirement ensures you maintain significant financial reserves even after the theoretical depletion calculation. It provides a buffer against market fluctuations and demonstrates your overall financial stability beyond just qualifying for the mortgage.

Some lenders use tiered approaches where the required asset ratio increases with the loan amount:

• Loans up to $500,000: 1.5x asset requirement
• Loans $500,000-$1,000,000: 2x asset requirement
• Loans above $1,000,000: 2.5x asset requirement

These ratios help ensure that larger loans are backed by proportionally larger asset bases, reducing risk for both the lender and borrower.

Debt-to-Income Considerations with Asset Depletion

Even with asset depletion qualification, lenders still calculate a debt-to-income (DTI) ratio using the theoretical income derived from your assets:

DTI Calculation:

• Monthly debts ÷ Monthly asset-derived income = DTI ratio
• Maximum DTI typically ranges from 43-50%, depending on the lender and your overall financial profile

For example, if your asset-derived income is calculated at $10,000 monthly and your total debts (including the new mortgage payment) would be $4,500 monthly, your DTI would be 45%.

Some Texas lenders may allow higher DTI ratios for borrowers with exceptional credit scores, substantial additional assets beyond those used for qualification, or significant residual cash flow.

Unlike traditional loans where actual income must cover living expenses beyond debt payments, asset depletion loans focus primarily on debt obligations. The assumption is that your assets can cover both debt payments and living expenses through the calculated depletion period.

Texas Asset Depletion Loan Options

Fixed-Rate Asset Depletion Mortgages

Fixed-rate asset depletion mortgages provide predictable payments throughout the loan term, offering stability for retirees and others on fixed incomes:

Term Options:

• 15-year fixed: Lower rates but higher monthly payments
• 20-year fixed: Middle ground between payment size and total interest
• 30-year fixed: Lowest monthly payments but highest total interest cost

Rate Premiums:

• Typically 0.5-1.0% higher than conventional mortgage rates
• Example: If conventional 30-year fixed rates are 6.0%, asset depletion rates might range from 6.5-7.0%

Benefits:

• Payment certainty for budgeting purposes
• Protection against future interest rate increases
• Potential to build equity faster with shorter terms
• Option to make additional principal payments without penalty

Fixed-rate options are particularly popular with Texas retirees who prefer predictable expenses and may be living on fixed incomes from pensions or Social Security in addition to their assets.

Adjustable-Rate Options for Asset-Based Qualification

Adjustable-rate mortgages (ARMs) offer lower initial rates that adjust periodically after an initial fixed period:

Common ARM Options:

• 5/6 ARM: Fixed for 5 years, then adjusts every 6 months
• 7/6 ARM: Fixed for 7 years, then adjusts every 6 months
• 10/6 ARM: Fixed for 10 years, then adjusts every 6 months

Initial Rate Advantage:

• Typically 0.5-0.75% lower than fixed-rate options
• Example: If fixed asset depletion rates are 6.5%, a 7/6 ARM might start at 5.75-6.0%

Rate Caps:

• Initial adjustment cap: 2-5%
• Periodic adjustment cap: 1-2%
• Lifetime cap: 5-6% above the initial rate

ARMs can be strategic choices for certain asset depletion borrowers, including:

• Those planning to sell the property before the initial fixed period ends
• Borrowers expecting significant additional liquidity within a few years
• Investors with plans to refinance or convert the property within the fixed period

The lower initial rates can also help maximize purchasing power, allowing borrowers to qualify for larger loan amounts compared to fixed-rate options.

Interest-Only Asset Depletion Loans

Interest-only options allow borrowers to pay only the interest portion of the loan for an initial period, reducing monthly payments:

Typical Structure:

• Interest-only period: 5-10 years
• Followed by: Fully amortizing payments for the remaining term (typically 20-25 years)
• Total term: Usually 30 years

Payment Example:

• $750,000 loan at 6.75%
• Interest-only payment: $4,219/month
• Fully amortized payment after interest-only period: $5,853/month (assuming 20-year remaining term)

Qualification Requirements:

• Higher credit scores (typically 720+)
• Larger down payments (25-30% minimum)
• More substantial assets (2.5-3x loan amount)
• Lower DTI ratios (typically maximum 43%)

Interest-only loans can be particularly beneficial for borrowers with:

• Irregular income patterns who want payment flexibility
• Investment strategies that prioritize keeping capital deployed elsewhere
• Plans to sell or refinance before the end of the interest-only period
• Tax strategies that benefit from maximizing interest deductions

Portfolio Asset Depletion Programs

Portfolio loans are kept on the lender's balance sheet rather than sold to investors, allowing for more flexible and customized terms:

Key Features:

• Custom underwriting guidelines tailored to unique situations
• More flexible property types (including non-warrantable condos)
• Higher loan limits (some Texas portfolio lenders go up to $5 million+)
• Consideration of alternative assets not accepted in standard programs

Common Portfolio Variations:

• Asset utilization loans (using a percentage of assets rather than dividing by 360 months)
• Pledged asset loans (using assets as collateral rather than depleting them)
• Hybrid qualification using both assets and some income
• Cross-collateralization options using multiple properties

Portfolio lenders in Texas often include:

• Regional banks with wealth management divisions
• Credit unions with high-net-worth membership bases
• Private banks catering to affluent clients
• Specialized mortgage lenders focusing on non-QM loans

These portfolio options often provide the most flexibility for complex financial situations that don't fit standard guidelines, though they typically come with higher rates and fees compared to conventional financing.

The Texas Asset Depletion Loan Process

Required Documentation for Asset Verification

Thorough asset documentation is the cornerstone of the asset depletion loan process. Be prepared to provide:

Account Statements:

• Most recent 2-3 months of statements for all accounts being used for qualification
• All pages of statements, even if blank
• Year-end statements for the previous year
• Online printouts must include your name, account number, and financial institution

Verification Documents:

• Account ownership verification
• Documentation of any recent large deposits
• Explanation and paper trail for transfers between accounts
• Proof of liquidation if assets were recently converted to cash

Additional Documentation:

• Investment portfolio summaries
• Retirement account statements with terms and conditions
• Documentation of any loans against retirement accounts
• Life insurance policy statements showing accessible cash value

Most Texas lenders require assets to be "seasoned" (held in your accounts for at least 60-90 days) to qualify for asset depletion calculations. Recently acquired assets may require additional documentation to verify their source.

Unlike income verification that might span years of history, asset verification focuses on your current financial position. However, lenders will scrutinize recent large deposits or withdrawals to ensure the assets represent your true financial situation rather than temporary funds.

Calculating Your Asset Depletion Income

Lenders follow specific formulas to convert your assets into a theoretical monthly income:

Standard Calculation Method:

1. Total all eligible assets
2. Apply discount factors to certain asset types (typically retirement accounts)
3. Divide the resulting value by 360 months (or other term based on age)
4. Use this figure as monthly income for DTI calculations

Example Calculation:

• $500,000 in checking/savings/non-retirement investments (100% value) = $500,000
• $1,000,000 in retirement accounts (70% value) = $700,000
• Total eligible assets after discounts = $1,200,000
• Divided by 360 months = $3,333 monthly income equivalent

Some Texas lenders use age-based adjustments for older borrowers:

• Under age 60: Divide by 360 months
• Ages 60-70: Divide by 300 months
• Ages 70-80: Divide by 240 months
• Over age 80: Divide by 180 months

These adjustments recognize that older borrowers have shorter life expectancies and may deplete assets more quickly, requiring a more conservative calculation.

Approval Timeline and Process

The asset depletion loan process typically takes longer than conventional loans due to the additional verification steps:

Pre-Qualification (1-3 days):

• Initial consultation to determine eligibility
• Preliminary asset and credit review
• Selection of appropriate loan program

Application and Documentation (7-14 days):

• Formal application submission
• Comprehensive asset documentation collection
• Property identification and contract (for purchases)

Underwriting (14-21 days):

• Detailed asset verification and analysis
• Property appraisal and review
• Title search and insurance verification
• Conditional approval issuance

Final Approval (5-7 days):

• Satisfaction of any underwriting conditions
• Final verification of assets before closing
• Closing disclosure preparation and review

Closing (1 day):

• Document signing
• Funding
• Property transfer (for purchases)

The total timeline typically spans 30-45 days, with the asset verification process often taking longer than income verification in conventional loans. Working with a lender experienced in asset depletion loans can help streamline this process and anticipate documentation requirements.

Texas-Specific Closing Considerations

Asset depletion loans in Texas follow the same closing procedures as other mortgages, with a few special considerations:

Texas Title Insurance Requirements:

• Regulated rates set by the Texas Department of Insurance
• Required for all mortgage transactions
• Costs based on loan amount rather than negotiated fees

Community Property Considerations:

• Texas is a community property state
• Both spouses typically need to sign loan documents, even if only one is on the loan
• Assets acquired during marriage may be considered jointly owned

Homestead Protections:

• Texas offers strong homestead protections limiting foreclosure
• Special disclosures required for loans on homestead properties
• Restrictions on home equity lending that may affect refinances

Closing Location Requirements:

• Texas requires closings to occur at title company offices, attorney offices, or lender locations
• Remote online notarization options are increasingly available but subject to specific regulations

Working with a Texas-based lender familiar with these state-specific requirements helps ensure a smooth closing process for asset depletion loans.

Texas Markets for Asset Depletion Loans

Retirement Communities and Areas

Texas has become a popular retirement destination, with several areas particularly well-suited for asset depletion financing:

Hill Country Retirement Communities:

• Sun City Texas (Georgetown)
• Kissing Tree (San Marcos)
• Robson Ranch (Denton)
• Hill Country Retreat (San Antonio)

Coastal Retirement Areas:

• South Padre Island
• Rockport/Fulton
• Galveston
• Port Aransas

Lake-Adjacent Communities:

• Lakeway (Lake Travis)
• Granbury (Lake Granbury)
• Gun Barrel City (Cedar Creek Lake)
• Hideaway (Lake Hideaway)

These communities often feature amenities specifically designed for active adults and retirees, including golf courses, fitness centers, social clubs, and healthcare facilities. Asset depletion loans are particularly common in these areas, where many residents have substantial retirement savings but limited regular income.

Luxury Markets and High-Net-Worth Areas

Asset depletion loans are frequently used in Texas's luxury real estate markets, where affluent buyers may have complex financial situations:

Dallas-Fort Worth Luxury Areas:

• Highland Park and University Park
• Westlake and Southlake
• Preston Hollow
• Frisco and Prosper (newer luxury developments)

Houston High-End Neighborhoods:

• River Oaks and Memorial
• The Woodlands
• Sugar Land (First Colony)
• West University and Bellaire

Austin Luxury Enclaves:

• Westlake and Rollingwood
• Barton Creek
• Tarrytown
• Lakeway (lake-adjacent properties)

San Antonio Upscale Areas:

• Alamo Heights
• Terrell Hills
• The Dominion
• Stone Oak

These markets feature properties ranging from $750,000 to several million dollars, often purchased by business owners, executives, investors, and other high-net-worth individuals who benefit from asset-based qualification.

Investment and Vacation Property Areas

Asset depletion loans can be valuable for financing second homes and investment properties in popular Texas vacation destinations:

Gulf Coast Areas:

• Galveston Island
• Port Aransas
• South Padre Island
• Rockport

Lake Properties:

• Lake Travis
• Lake LBJ
• Lake Conroe
• Possum Kingdom Lake

Hill Country Getaways:

• Fredericksburg
• Wimberley
• New Braunfels
• Marble Falls

Investors and second-home buyers often have substantial assets but may not want to liquidate investments or may have income structures that make traditional qualification challenging. Asset depletion provides a pathway to financing these properties while maintaining investment strategies.

Apply for a Texas Asset Depletion Loan Today

Ready to leverage your assets for a Texas home purchase or refinance? Truss Financial Group specializes in asset depletion loans for high-net-worth individuals, retirees, and others with substantial assets but non-traditional income.

Our Asset Depletion Advantages:

• Specialized underwriting for complex financial profiles
• Multiple asset depletion calculation methods to maximize qualification
• Experience with diverse asset types and portfolio structures
• Competitive rates and flexible terms
• Personalized service from application through closing

Getting Started is Simple:

1. Schedule a consultation with our asset depletion specialists
2. Receive a preliminary qualification analysis
3. Complete our streamlined application
4. Work with a dedicated loan officer throughout the process
5. Close on your Texas property with confidence

Contact us today to learn how your assets can help you achieve your Texas real estate goals:

• Call: (888) XXX-XXXX
• Email: assets@trussfinancial.com
• Online: Complete our secure asset depletion pre-qualification form

Frequently Asked Questions: Texas Asset Depletion Loans

What minimum assets do I need for an asset depletion loan in Texas?

Most Texas lenders require eligible assets worth at least 1.5-2.5 times your desired loan amount. For example, to qualify for a $500,000 loan, you might need $750,000-$1,250,000 in eligible assets after applying any discount factors to retirement accounts.

The specific requirement varies based on:

• Your credit score and profile
• The property type and location
• Your age and retirement status
• The specific lender's guidelines

Some lenders use tiered approaches requiring higher asset ratios for larger loan amounts. Working with a knowledgeable mortgage advisor can help determine the specific asset requirements for your situation.

Can I use retirement accounts for asset depletion loans?

Yes, retirement accounts like 401(k)s, IRAs, and other qualified plans can be used for asset depletion qualification, but most lenders apply a discount factor of 30-40% to account for taxes and penalties on withdrawals.

For example, a $500,000 IRA might be valued at $300,000-$350,000 for qualification purposes. Some lenders apply smaller discounts for borrowers over age 59½ who can access retirement funds without early withdrawal penalties.

Retirement accounts must typically be vested and accessible (not still with a previous employer with withdrawal restrictions). Required minimum distributions (RMDs) from retirement accounts can also be counted as regular income in addition to the asset depletion calculation.

How do asset depletion loan interest rates compare to conventional loans?

Asset depletion loans typically have interest rates 0.5-1.5% higher than conventional mortgages with similar terms. This rate premium reflects the non-traditional qualification method and perceived additional risk.

Current rate ranges in Texas (as of March 2025):

• 30-year fixed conventional: 6.0-6.5%
• 30-year fixed asset depletion: 6.5-8.0%
• 15-year fixed conventional: 5.25-5.75%
• 15-year fixed asset depletion: 5.75-7.25%
• 7/6 ARM conventional: 5.5-6.0%
• 7/6 ARM asset depletion: 6.0-7.5%

Your specific rate will depend on:

• Credit score and history
• Loan-to-value ratio
• Property type and use
• Asset types and amounts
• Loan amount and term

Despite the higher rates, asset depletion loans often represent the only viable financing option for borrowers with substantial assets but limited income, making the premium worthwhile for those who need this qualification method.

Can asset depletion loans be used for investment properties in Texas?

Yes, asset depletion loans can be used for investment properties in Texas, though with stricter requirements than for primary residences:

Investment Property Requirements:

• Larger down payments (typically 30-40%)
• Higher credit score minimums (usually 720+)
• More substantial assets (typically 2.5-3x loan amount)
• Higher interest rates (additional 0.5-0.75% above primary residence rates)
• More conservative asset depletion calculations

Some lenders offer hybrid qualification methods for investment properties that consider both the property's rental income potential and the borrower's assets, providing more flexible qualification options for real estate investors.

Investment property asset depletion loans are particularly valuable for retirees building rental portfolios for additional income or high-net-worth individuals diversifying their investments through real estate.