Monday, 12 March 2012 17:39
Use Assets As Income! Perfect for borrowers that do not have much income but have a large amount of assets.
- Assets must be liquid, owned solely by the borrowers, with unrestricted access and 100% of the balance available without penalty if the asset is a retirement account recognized by the IRS.
- How to calculate asset based income: Divide “Net Documented Assets **” by 360 months (30 year term must be used regardless of borrower age or amortization term)
- Eligible for Purchases or Rate/Term Refinances only
- 70% maximum LTV
** Net Documented Assets = 70% of the sum of eligible documented assets minus any funds that will be used for closing costs or reserve requirements. Assets used for income qualification cannot be used for closing costs or reserve requirements.
Examples of eligible assets include, but are not limited to:
- 401k, IRA, and Keogh accounts – only eligible for use if distribution is not already set up or the distribution amount is not enough to qualify. The account must be documented with the most recent statement.
- Non-self Employed Severance and Lump Sum Retirement Packages deposited into a retirement account. Must be documented with a distribution letter from the employer (1099R). Must provide evidence of deposit to a verified retirement account. Must provide copies of the most recent three months personal depository or brokerage account.
- Non-Self Employed Severance and Lump Sum Retirement Packages not deposited into a retirement account. Lump-sum distribution funds must be derived from a retirement recognized by the IRS (ie. 401k, IRA) and must be deposited to a non-retirement brokerage or retirement account. A borrower on the mortgage must have been the recipient of the lump-sum distribution funds. Parties not obligated on the mortgage may not have an ownership interest in the account that holds the funds from the lump-sum distribution. The proceeds from the lump-sum distribution must be immediately accessible in their entirety and must not have been or currently be subject to a penalty.
- Examples of ineligible assets include, but not limited to: Non-employment related assets (ie. Stock options, non-vested restricted stock, lawsuits, lottery winnings, sale of real estate, inheritance, and divorce proceedings.