1. What is Asset Depletion Calculation?

Asset Depletion is a method used by Fannie Mae to calculate qualifying income for mortgage applicants based on their liquid assets. This approach helps determine the borrower's ability to make mortgage payments by converting assets into monthly income.

2. How Does the Calculator Work?

The calculator uses the Asset Depletion formula:

Where:

• \( Assets \) — Total liquid assets available
• \( Down\ Payment \) — Amount allocated for down payment
• \( Reserves \) — Required reserve funds
• \( 360 \) — Number of months in 30 years (standard mortgage term)

Explanation: This formula calculates the monthly income that can be generated from the remaining assets after accounting for down payment and reserve requirements.

3. Importance of Asset Depletion Income

Details: Asset depletion income is particularly important for self-employed individuals, retirees, or those with significant assets but irregular income streams. It provides an alternative method to qualify for mortgage financing based on asset strength rather than traditional employment income.

4. Using the Calculator

Tips: Enter total assets in currency, down payment amount in currency, and required reserves in currency. All values must be non-negative numbers. The calculator will compute the monthly qualifying income.

5. Frequently Asked Questions (FAQ)

Q1: What types of assets qualify for asset depletion?
A: Typically, liquid assets such as cash, savings, investments, retirement accounts, and other readily accessible funds qualify for asset depletion calculations.

Q2: Why is 360 used in the denominator?
A: 360 represents the number of months in a 30-year mortgage term, which is the standard timeframe used to distribute assets for income calculation purposes.

Q3: Are there minimum asset requirements?
A: Yes, Fannie Mae typically requires that the remaining assets after down payment and reserves be sufficient to support the calculated income for the mortgage term.

Q4: Can asset depletion be combined with other income?
A: Yes, asset depletion income can often be combined with other qualifying income sources to meet mortgage requirements.

Q5: What documentation is required for asset depletion?
A: Typically, bank statements, investment account statements, retirement account statements, and other documentation proving asset ownership and liquidity are required.