Asset Utilization Loan

Asset Utilization may be used as the sole source of income for loan qualification or to supplement other income sources.  When used to supplement other income sources, the minimum asset requirements under qualification method are waived by most lenders for this type of loan.

Depending upon the lender, following is one of the easy ways to calculate income for a high net-worth client. 

For most lenders and for this particular loan, the rule of thumb is that the asset (checking, savings, retirement, stocks, bonds, etc.) is either greater than $1,000,000 or 150% of the loan amount. Keep in mind, the amount of the asset eligible for use depends on the investor. i.e. 100% of a checking account can be used, but only 60% of a retirement account.

To calculate the amount used for income, the lender would typically take the asset and subtract the following:

• Down Payment

• Closing Costs

• Reserves

The result of that, you would then divide it by 84. That would be your monthly income. 

Below is an example:

• Purchase Price $625,000.00

• Loan Amount $500,000.00

• Assets

  • Checking Account $2,125,000.00 

  • Retirement Account: $100,000.00

  • Assets Eligible for Use = $2,125,000 + ($100,000 * 60%) = $2,185,000.00

  • Subtract $125,000 for down payment, $25,000.00 for closing costs and $24,000.00 for reserves.

  • Subtotal is $2,011,000

• Qualifying monthly income is $2,011,000.00 / 84 = $23,940.48

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