Assets as Income

Did you know that assets can be used as qualifying income?

Income derived from the conversion of the borrower’s liquid assets into a monthly stream from assets that are not employment-related (“Other Financial Assets”) may be used to qualify the borrower in accordance with the requirements below - Fannie Mae - Conventional/Conforming Non-Employment Related Assets as Qualifying Income.

 

Eligibility Requirements

• Maximum LTV/CLTV/HCLTV (%)  
  º Purchase / Limited Cash-Out Refi = 80%
  º Cash-Out Refi = 60%
• Minimum FICO Score
  º LTVs less than 70% = 680
  º LTVs greater than 70% = 720
• Occupancy Types
  º Eligible: 1-2 unit and Second Homes
  º Ineligible: Investment Properties and 3-4 Units

 

Assets Eligible as Other Financial Assets

• Maximum LTV/CLTV/HCLTV (%)  
  º The same eligible liquid financial assets listed as eligible in the eligible assets topic of the FWL guidelines may be used; and
• Funds from the sale of investment properties

Note: all other assets types are ineligible. For a list of examples see the Ineligible Assets topic in the FWL guidelines.

 

Monthly Income Stream Calculation – See Non-Employment Assets as qualifying income worksheet in the FWL guidelines, to calculate monthly income stream.

Asset Requirements

• Eligible assets must be owned individually by the borrower, or the co-owner of the assets must be a coborrower of the mortgage loans.
• Eligible assets used for the calculation of the monthly income stream must be liquid and available to the borrower with no penalty.
• Eligible assets in the form of stock, bonds, mutual funds, or U.S. savings bonds: 70% of the value (remaining after costs for the transaction) must be used to determine the income stream.
• Demand deposit accounts, savings accounts or certificates of deposit: 100% of the value may be used to determine the income stream.

 

“Net documented assets” are equal to:

1. the sum of eligible documented Other Financial Assets minus any funds that will be used for closing or required reserves, and
2. minus 30% of the remaining value of any stocks, bonds, mutual funds, or U.S. savings bonds assets (after the calculation in (1)).

 

Example: Calculation of Net Documented Assets

Liquid Assets (Checking, Savings, etc.)	$40,000
IRA (made up of stocks, bonds and mutual funds)	$500,000
Minus funds required for closing (down payment, closing costs, reserves)	(-) $100,000
(a) Subtotal Remaining IRA asset	(=) $440,000
Minus 30% (as per guidelines noted above)	(-) $132,000
(b) Net Documented Assets	(=) $308,000

 

 

 

 

 

 

 

Note: See also Fairway guides for:

• Freddie Mac Assets as Qualifying Income (Non-Employment Related); and
• Fannie Mae, Freddie Mac and Non-QM Jumbo program for Assets as Qualifying (Employment Related).