The Bottom Line
Having significant savings and investments does not always make it easy to qualify for a mortgage.
Traditional mortgage qualification tends to focus heavily on monthly income. That can create challenges for retirees, investors, business owners, buyers in their 50s who have started winding down their income, or move-up buyers who have significant assets but need to qualify before selling their current home.
That’s where asset depletion can help.
Freddie Mac recently announced significant changes to the way borrowers can use accumulated assets to qualify for a mortgage. The changes expand who can qualify, allow more property types, and can substantially increase the amount of monthly qualifying income generated from the same assets.
For the right homebuyer, these changes could be a big deal.
Table of Contents
Key Takeaways
- More of Your Assets Can Translate Into Qualifying Income: Freddie Mac is changing the calculation from dividing eligible assets by 240 months to dividing them by 180 months. That can generate approximately 33% more monthly qualifying income from the same amount of eligible assets.
- You Don’t Have to Be Retirement Age: Freddie Mac is removing the previous age restriction that applied when using eligible depository accounts and securities.
- Investment Properties Are Now Included: The updated guidelines allow accumulated assets to be used as qualifying income for primary residences, second homes, and investment properties.
- It Can Help With Buy-Before-You-Sell Scenarios: For some move-up buyers, these rules may provide additional qualifying income to help them buy before they sell and temporarily carry both homes.
- The 20% Down Threshold Is Important: Freddie Mac is removing the previous 80% maximum loan-to-value restriction and instead allowing the loan to follow its standard LTV guidelines for the applicable property and transaction type. Depending on the scenario, that could mean a borrower is no longer required to put 20% down simply because they are qualifying with accumulated assets.
- Lenders Can Implement the Changes Now: The new guidelines become mandatory for eligible Freddie Mac mortgages with settlement dates on or after February 3, 2027, but Freddie Mac is allowing lenders to implement them immediately.
Watch: How the New Asset Depletion Rules Could Help Homebuyers
Prefer the quick version? Check out this 60 second video to see how the new asset depletion rules could impact your mortgage qualification.
What Is an Asset Depletion Mortgage?
Despite the name, an asset depletion strategy doesn’t necessarily mean you have to sell or “deplete” your investments every month to make your mortgage payment.
Instead, eligible assets can be converted into a calculated monthly amount that the lender uses when determining whether you qualify for the mortgage.
Think of it as turning a portion of your financial assets into qualifying income on paper.
In real life, this often comes up in two practical situations.
The first is the borrower who has built real wealth but is in an income gap. They may be in their 50s, not old enough or ready to draw from retirement accounts, but already easing out of their peak earning years. On paper, their monthly income may look light, even though their overall financial position is strong.
The second is the buyer who wants to purchase a new home before selling their current one. Asset depletion can sometimes provide the extra qualifying income needed to carry both homes temporarily while they make the move. That does not mean carrying two mortgages is ideal or should be treated casually, but it can be a practical way to bridge the timing gap without forcing a sale first.
If you’re trying to understand the different ways lenders evaluate income, assets, and debt when approving a mortgage, you can also read my recent blog for a deeper look at how the qualification process works.
Why Did Freddie Mac Change the Asset Calculation?
One of the biggest changes is the formula lenders can use to convert eligible assets into monthly qualifying income.
Under the previous guidelines, Freddie Mac generally required lenders to determine the borrower’s net eligible assets and divide that amount by 240 months.
The new guidelines reduce that divisor to 180 months.
That might sound like a small technical change, but the impact can be significant.
Here’s a Simple Example
Let’s assume that after accounting for the funds needed for the transaction and other required deductions, a borrower has $900,000 in net eligible assets.
Under the old calculation:
$900,000 ÷ 240 = $3,750 per month
Under the new calculation:
$900,000 ÷ 180 = $5,000 per month
The borrower has exactly the same amount of assets.
But under the new Freddie Mac calculation, those assets can generate an additional $1,250 per month in qualifying income.
That’s a 33% increase.
For someone who was just short of qualifying for the home they wanted, that difference could potentially change the entire conversation.
Freddie Mac’s updated Guide requires lenders to first determine eligible documented assets and then subtract items such as funds needed to complete the transaction, required reserves, gift funds, borrowed funds, and assets pledged as collateral before applying the calculation.
You No Longer Have to Be Retirement Age
This is another important change.
Under the previous Freddie Mac guidelines, at least one borrower who owned certain depository accounts or securities generally had to be at least 62 years old for those assets to be used in this calculation.
Freddie Mac is removing that age restriction.
That could make asset-based qualification relevant to a much broader group of homebuyers.
That matters because many financially strong buyers do not fit the old retiree-only mold.
A borrower may have substantial savings or investments, but not be drawing enough monthly income from those assets to satisfy traditional underwriting.
Under the new rules, age by itself is no longer the barrier it used to be for those accounts.
Asset Depletion Is Expanding to Investment Properties
The property eligibility rules are also expanding.
Previously, Freddie Mac’s asset qualification guidelines were limited to a one or two-unit primary residence or a second home.
The new guidelines permit accumulated assets to be used as qualifying income across all occupancy types, including:
- Primary residences
- Second homes
- Investment properties
That’s an important expansion for buyers who have accumulated substantial assets and want to use real estate as part of their overall investment strategy.
You May Not Need to Put 20% Down
This is another change that deserves attention.
Under the previous asset qualification guidelines, Freddie Mac generally limited these mortgages to a maximum 80% loan-to-value ratio.
In simple terms, that typically meant at least 20% equity was required.
The new guidelines remove that specific 80% LTV restriction. Instead, the loan can follow Freddie Mac’s standard LTV requirements based on the property type and transaction.
That does not mean every borrower using asset depletion can automatically make a small down payment. The maximum financing available will depend on the property, transaction, underwriting results, and other Freddie Mac requirements.
But it does mean that using assets as qualifying income no longer automatically creates the same 80% LTV ceiling.
That’s a meaningful improvement because borrowers may be able to qualify without tying up as much of their available liquidity in the home.
What Assets Can Be Used?
Not every dollar in your financial portfolio will necessarily qualify.
Freddie Mac has specific requirements surrounding eligible assets, ownership, accessibility, documentation, and how account balances are calculated.
Depending on the circumstances, qualifying assets may include certain:
- Checking and savings accounts
- Money market accounts
- Securities and investment accounts
- Retirement accounts
- Lump-sum distributions
- Proceeds from the sale of a business
- Proceeds from the sale of real estate
Cryptocurrency cannot be included in the eligible asset calculation.
The new guidelines also introduce additional documentation and seasoning requirements for certain depository and securities accounts, including a general requirement that those accounts be seasoned for 12 months unless they were funded from an eligible documented source.
This is one of the reasons it’s important to have your lender review the complete financial picture rather than simply looking at the balance on an investment statement.
Who Could Benefit From These Changes?
Asset depletion isn’t designed for every homebuyer.
But it can be extremely useful when someone’s financial strength isn’t accurately reflected by their traditional monthly income.
Potential candidates could include:
- Retirees with substantial savings and investments
- Pre-retirees with significant assets but reduced traditional income
- Move-up buyers who want to buy before selling their current home
- Business owners with significant assets but complicated taxable income
- Investors with large brokerage portfolios
- Individuals who recently sold a business or another property
- High-net-worth borrowers with irregular income
The common thread is simple.
You may have the financial resources to comfortably afford the home, or to carry two homes during a transition, but your tax returns, pay stubs, or traditional income don’t tell the whole story.
That’s when it’s worth exploring whether an alternative qualification strategy makes sense.
Why Working With the Right Lender Matters
These guidelines are a great example of why mortgage qualification isn’t always as simple as plugging income into an online calculator.
Two borrowers with similar assets can have very different qualifying results depending on the types of accounts they own, how long the assets have been held, where the money came from, how much is needed for the transaction, and which mortgage guidelines apply.
There’s also an important timing consideration with these particular changes.
Freddie Mac is allowing lenders to implement the new rules immediately, but they do not become mandatory until mortgages with settlement dates on or after February 3, 2027. That means lender implementation may vary during the transition period.
If you think asset depletion could apply to you, working with a knowledgeable lender early in the process can help determine which assets are eligible and how much qualifying income they could actually generate.
Sometimes the issue isn’t whether you can afford the home.
It’s finding the right way to document and structure your finances so the mortgage guidelines accurately reflect your ability to repay the loan.
Frequently Asked Questions About Asset Depletion Mortgages
Do I Have to Sell My Investments to Qualify?
Not necessarily.
The purpose of the calculation is to use eligible documented assets to establish a qualifying monthly amount. However, Freddie Mac has specific rules regarding accessibility, ownership, documentation, and eligible asset types.
Your lender will need to review your individual accounts to determine what can be included.
How Much Income Can My Assets Generate?
Under Freddie Mac’s new calculation, net eligible assets are divided by 180 months.
For example, $900,000 of net eligible assets would generate $5,000 per month of qualifying income.
The actual calculation is more detailed because certain amounts must first be deducted from your total eligible assets.
What Gets Subtracted From My Assets Before the Calculation?
Freddie Mac’s updated calculation requires lenders to subtract funds needed to complete the transaction, required reserves, gift funds, borrowed funds, and any portion of assets pledged as collateral or otherwise encumbered.
The remaining amount becomes your net eligible assets used for the calculation.
Do I Need to Be 62 to Use Asset Depletion?
Under the new Freddie Mac guidelines, the previous borrower age restriction for depository accounts and securities is being removed.
This is one of the most significant changes because it potentially opens this qualification strategy to younger borrowers with substantial assets.
Can I Use Asset Depletion to Buy an Investment Property?
Under the updated guidelines, yes.
Freddie Mac is expanding eligibility to all occupancy types, including primary residences, second homes, and investment properties.
Do I Need 20% Down?
Not necessarily.
The new guidelines remove the previous 80% maximum LTV specifically associated with using assets for qualification. The mortgage can instead follow Freddie Mac’s applicable LTV requirements.
The actual down payment required will depend on your property type, transaction, loan structure, and underwriting results.
When Do the New Freddie Mac Asset Depletion Rules Take Effect?
Freddie Mac states that the changes apply to mortgages with settlement dates on or after February 3, 2027.
However, lenders are permitted to implement the new guidelines immediately.
Because implementation may vary by lender before the mandatory date, it’s worth confirming which guidelines your lender is currently using.
Does Having Enough Assets Guarantee That I’ll Qualify?
No.
Assets are only one part of mortgage qualification.
Your lender still needs to evaluate the complete loan scenario, including credit, debts, property type, loan-to-value ratio, eligible assets, documentation, and other underwriting requirements.
That’s why it’s important to have your specific scenario reviewed before assuming you qualify based solely on the size of an investment or savings account.
Final Thoughts
For financially strong homebuyers who don’t fit neatly into traditional income qualification, Freddie Mac’s new asset depletion guidelines could create some meaningful opportunities.
The change from 240 months to 180 months can generate approximately 33% more qualifying income from the same net eligible assets. The removal of the age restriction opens the strategy to more borrowers. Investment properties are now included, and the previous 80% LTV restriction is being removed.
Taken together, these are significant changes.
But asset depletion is also a perfect example of why mortgage qualification should be viewed as a strategy, not simply a yes-or-no calculation.
If you have significant savings or investments but have been told that your income isn’t high enough to qualify for the home you want, or if you want to buy your next home before selling your current one, it may be worth taking another look.
Working with a trusted local lender who understands different qualification strategies can help you evaluate your complete financial picture, identify which assets can be used, and determine the mortgage structure that makes the most sense for your goals.
You can visit my homepage to learn more about how I help homebuyers develop a smart financing strategy, or explore my Homebuyers Questions Blogs for more information about the different ways buyers can qualify.
And if you’ve previously been told you don’t qualify because of your income, don’t automatically assume the answer is still no. With these new guidelines, the math may look very different.