Coming Soon: Asset Based Loan


In a recent post, I mentioned about conventional loans lowering the minimum credit score requirements and raising the debt to income ratio limit as signs that loan guidelines are easing. Another sign is the reintroduction of asset based loan programs.

These programs were more readily available during the housing bubble from a few years back. With the downturn in the housing market, asset based loans disappeared. In order to qualify buying or refinancing a home using retirement assets, the borrower would need to document a history of receiving retirement income. The borrower also needs to document at least a three year continuance of receiving the same level of income from retirement savings. Not anymore.

To qualify, add up all retirement assets (IRA, 401k, SEP or Keogh) to get a lump sum. As long as the borrower can take money from these accounts without penalty, they can be used. Then take 70% of the balance of those combined accounts. Then divide that number by 360. For example:

– borrower has a total of $600,000 in qualifying retirement assets
– 70% of the $600,000 balance is $420,000
– Divide $420,000 by 360 and the monthly income is $1,167

You now have a monthly income for qualifying purposes without the need to document currently receiving the income or a three year continuance. The asset based income can be combined with social security and other qualifying income for the loan. Borrowers also need a 620+ credit score and a minimum of a 30% down payment/equity.

This is a great program for a soon to be retiree who has the assets, but has yet to begin drawing from the retirement accounts. If this is you and buying a home in the state of Georgia, I’d be happy to help you get started.



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