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FNMA Asset Depletion Formula:
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The FNMA (Fannie Mae) Asset Depletion Calculator calculates monthly income based on available assets and reserves. This method is used to qualify borrowers who have significant assets but may not have traditional income sources.
The calculator uses the FNMA Asset Depletion formula:
Where:
Explanation: The formula calculates a monthly income stream by distributing the net available assets (assets minus reserves) over a 30-year period.
Details: This calculation is crucial for mortgage qualification, particularly for self-employed individuals, retirees, or those with substantial assets but irregular income patterns. It helps lenders assess borrowing capacity based on liquid assets.
Tips: Enter total assets and required reserves in dollars. Both values must be non-negative numbers. The calculator will compute the monthly income amount based on FNMA guidelines.
Q1: What types of assets are considered in this calculation?
A: Typically includes liquid assets such as cash, savings, investments, and retirement accounts that can be readily converted to cash.
Q2: How are reserves determined?
A: Reserves typically include required cash reserves for mortgage payments, property taxes, insurance, and other obligations.
Q3: Why is 360 used as the divisor?
A: 360 represents 30 years of monthly payments (30 years × 12 months), which is a standard timeframe for mortgage qualification calculations.
Q4: Can this calculation be used for all loan types?
A: Primarily used for conventional loans following FNMA guidelines. Other loan programs may have different calculation methods.
Q5: How accurate is this income calculation for qualification purposes?
A: This provides a conservative estimate of monthly income based on available assets, but final qualification depends on overall financial profile and lender requirements.