1. What is FNMA Asset Depletion?

FNMA (Fannie Mae) Asset Depletion is a method used by Freddie Mac to calculate qualifying monthly income based on a borrower's liquid assets. This approach helps determine mortgage eligibility for individuals with significant assets but potentially lower traditional income.

2. How Does the Calculator Work?

The calculator uses the FNMA asset depletion formula:

Where:

• \( \text{Assets} \) — Total liquid assets in dollars
• \( 0.7 \) — Asset utilization factor (70% of assets considered)
• \( 240 \) — Depletion period in months (20 years)

Explanation: The formula assumes 70% of assets can be used over a 20-year period (240 months) to generate monthly income for mortgage qualification purposes.

3. Importance of Asset Depletion Calculation

Details: Asset depletion income calculation is crucial for mortgage underwriting, particularly for self-employed individuals, retirees, or those with significant investments but irregular income streams.

4. Using the Calculator

Tips: Enter total liquid assets in dollars. Only include assets that are readily convertible to cash (savings, investments, retirement accounts). Exclude non-liquid assets like primary residence equity.

5. Frequently Asked Questions (FAQ)

Q1: What types of assets qualify for this calculation?
A: Liquid assets including cash, savings accounts, stocks, bonds, mutual funds, and retirement accounts (subject to age-based withdrawal rules).

Q2: Why is only 70% of assets considered?
A: This conservative approach accounts for potential market fluctuations, taxes on asset sales, and maintains a safety margin in the calculation.

Q3: How does this differ from traditional income calculation?
A: Traditional underwriting uses documented regular income (wages, salary), while asset depletion calculates potential income from liquid assets.

Q4: Are there minimum asset requirements?
A: Lenders typically require significant asset levels to use this method, often with minimum thresholds that vary by lender and loan program.

Q5: Can this method be combined with other income sources?
A: Yes, asset depletion income can often be added to other qualifying income sources, subject to lender overlays and program guidelines.