ASSET DEPLETION
Property Types

An Asset Depletion Purchase Loan, also known as an asset-based loan, is a mortgage program designed for individuals who have significant liquid assets but may not have a steady income stream to qualify for a traditional mortgage. This type of loan uses the borrower’s assets to calculate their income, making it an attractive option for retirees, business owners, or individuals with substantial investment portfolios who prefer to leverage their assets instead of relying on monthly income. When considering an Asset Depletion Purchase Loan, it is essential to understand the types of properties that are eligible for this loan program.

Eligible Property Types for an Asset Depletion Purchase Loan:

Primary Residence
– Single-Family Home: One of the most common property types, single-family homes are fully eligible for asset depletion loans. These are detached homes that serve as the borrower’s primary residence.
– Townhome: A type of property that shares walls with adjacent units but has separate entrances and sometimes small yards. Townhomes are also eligible as long as they meet the lender’s specific guidelines for asset-based loans.
– Condominium: Condos can be eligible for asset depletion loans, but they may be subject to stricter underwriting standards. Lenders typically want to ensure the condominium complex has a stable homeowners association (HOA), and that there are no outstanding litigation or occupancy rate issues.

Secondary/Vacation Homes
– Second Home: Asset depletion loans are available for financing second or vacation homes, provided the borrower can demonstrate that they are buying it for personal use and not as a rental investment.
– Vacation Property: Similar to second homes, vacation properties in desirable locations can be financed through an asset depletion loan. However, certain types of vacation homes in remote or difficult-to-access locations may face additional scrutiny.

Investment Property
– Rental Property: In some cases, asset depletion loans can be used for investment properties, such as single-family homes, duplexes, or other small residential rental properties. Lenders may analyze the property’s rental income, but the primary focus remains on the borrower’s assets.
– Multi-Family Properties (up to 4 units): Borrowers may use an asset depletion loan to purchase a multi-family property, such as a duplex, triplex, or fourplex, as long as the number of units does not exceed four. These properties can generate rental income, but the borrower’s liquid assets remain the critical factor in determining loan eligibility.

Luxury Property
– High-Value Homes: Asset depletion loans are especially popular among high-net-worth individuals looking to purchase luxury homes. Many lenders have specific programs tailored to high-value properties, often requiring a larger amount of assets in liquid form.
– Estates and Custom-Built Homes: Custom-built homes and large estates fall within the scope of eligible properties for asset depletion loans. These high-end properties may require more detailed appraisals, but the loan program’s flexibility with asset-based income calculation makes it a viable option for such purchases.

Non-Warrantable Condos
– Condominiums that do not meet conventional lending requirements, such as those with a high percentage of non-owner-occupied units or involvement in ongoing litigation, may still be eligible under an asset depletion loan, though lenders will often impose higher down payment requirements or interest rates for these riskier properties.

Property Restrictions and Considerations
– Ineligible Property Types: Certain property types are generally excluded from asset depletion loans. These include raw land, mobile homes, cooperatives (co-ops), and agricultural properties such as farms or ranches.
– Property Condition: Eligible properties must typically meet the lender’s condition standards, meaning they must be in livable condition and not require extensive repairs.
– Location: Some lenders may impose geographic restrictions or be more cautious about properties located in rural or remote areas where real estate values fluctuate more significantly.

Asset Depletion Purchase Loans offer flexibility for buyers with substantial assets, making it possible to purchase various property types. The loan is ideal for borrowers whose financial profile is asset-heavy but income-light. Eligible property types typically include primary residences, second homes, vacation homes, and small-scale investment properties, with particular attention to the borrower’s liquid assets rather than their income stream. However, properties like raw land, mobile homes, and farms are generally excluded from this loan type. Each lender may have specific guidelines, so working closely with a mortgage professional is essential for navigating property eligibility and securing the right loan for your financial situation.