1. What is the FNMA Asset Depletion Calculator?

The FNMA (Fannie Mae) Asset Depletion Calculator is used in real estate to calculate qualifying monthly income based on a borrower's liquid assets minus required reserves. This method helps lenders evaluate a borrower's ability to make mortgage payments when traditional income documentation is limited.

2. How Does the Calculator Work?

The calculator uses the FNMA asset depletion formula:

Where:

• \( Assets \) — Total liquid assets (dollars)
• \( Reserves \) — Required reserves (dollars)
• \( 360 \) — Represents 30 years converted to months (30 years × 12 months)

Explanation: This formula calculates the monthly income that can be derived from a borrower's liquid assets after setting aside required reserves, spread over a 30-year period.

3. Importance of Asset Depletion Calculation

Details: Asset depletion income calculation is particularly important for self-employed borrowers, retirees, or those with significant assets but irregular income patterns. It provides an alternative method to qualify for mortgage financing based on asset strength rather than traditional income documentation.

4. Using the Calculator

Tips: Enter total liquid assets and required reserves in dollars. Assets must be greater than or equal to reserves. The calculator will compute the monthly qualifying income based on FNMA guidelines.

5. Frequently Asked Questions (FAQ)

Q1: What types of assets qualify for this calculation?
A: Typically, liquid assets such as cash, savings, investments, and retirement accounts. Real estate and other illiquid assets are generally excluded.

Q2: How are required reserves determined?
A: Reserves typically include several months of mortgage payments, property taxes, insurance, and other housing expenses, as specified by lender guidelines.

Q3: Why is the divisor 360?
A: The divisor represents 360 months (30 years), which is the standard period over which assets are depleted for mortgage qualification purposes.

Q4: Can this method be combined with other income?
A: Yes, asset depletion income can often be combined with other documented income sources to meet qualification requirements.

Q5: Are there minimum asset requirements?
A: Most lenders require a minimum asset threshold, typically significantly higher than the required reserves, to use this qualification method.