Hey folks, Joe Libin with Latitude Lending here. Welcome to this month’s Breaking Down the Mortgage. Hope you’re all doing well. I want to share another product with you—an actual lending product that’s a great new arrow in the quiver to help you sell more homes. It’s not really new, but it’s new to many people.
This program is primarily designed for folks who aren’t showing much income, or maybe no income at all, but who have significant assets. It’s called asset utilization.
Think of it this way: someone wants to buy before they sell, or maybe they already have their current home under contract. They’re planning to roll $300,000 or $400,000 into their next home, whether they’re moving up or downsizing. They need to borrow money, but they don’t show much income on the W-2 side or as a self-employed borrower. What they do have is a substantial amount of assets. Even if they aren’t putting a large amount down, we can still use those assets to qualify them. It’s all about using assets as income.
Here’s how it works. Let’s say someone has $1 million in retirement savings but they’re only 48 years old, so they’re not retirement age yet. We can use 70% of those retirement assets to account for early withdrawal penalties. That gives us $700,000.
With traditional Fannie Mae and Freddie Mac guidelines, that amount would typically be divided over 240 or 360 months, which doesn’t generate much qualifying income. With this non-QM program, we divide that same $700,000 over just 60 months. That creates approximately $11,000 per month in qualifying income. Problem solved.
So who is this program designed for? Think about retirees living comfortably on savings, pensions, or investments. It also works well for early retirees who have stepped away from high-paying careers. For example, I recently worked with an engineer who decided to become a Pilates instructor. Their income dropped significantly, but they still had a substantial 401(k) that could be used for qualification.
This program can also be a great fit for unemployed or underemployed borrowers living off their assets, trust fund recipients, recent divorcees who received a legal settlement, self-employed borrowers with significant wealth but little taxable income, high-net-worth individuals, and investors relying primarily on assets or rental income.
The interest rates are slightly higher than conventional Fannie or Freddie financing, but this program allows qualified borrowers to move forward with purchasing a home without unnecessary obstacles or needing a co-signer.
If you have clients who fit this profile, keep this program in mind. As long as they have assets, we may have a solution.
As always, if you have questions, please reach out. Never too busy to help, and never too busy for your referrals. Thanks for watching, and we’ll catch you next time. Take care.
