What is an asset-based or asset-depletion loan?
An asset-based loan, also called an asset-depletion loan, is an alternative-documentation non-QM mortgage that qualifies you from your documented liquid assets, such as savings, brokerage holdings, and sometimes retirement accounts, instead of from a paycheck or a tax return. The lender converts your eligible assets into a monthly qualifying figure and underwrites the file the way any mortgage is underwritten.
Here's why it exists. Some borrowers are genuinely wealthy but don't show a steady current income an underwriter can count: a retiree living off a portfolio, a high-net-worth buyer between income events, a business owner who took a low salary this year. Their ability to pay is real, it just lives in their assets rather than a W-2 or a Schedule C. An asset-based loan documents qualification from those assets. To be clear about what this is not: it's not a way to skip documenting anything, and it's not a rate promise. Your assets are the documented basis, verified through your statements, and the federal Ability-to-Repay rule still applies.
How is qualifying income calculated from assets?
The lender divides your eligible liquid assets by a set number of months to derive a monthly qualifying figure, often after applying a haircut to certain asset classes. The exact divisor, which assets count, and the haircuts vary by the wholesale investor's program.
Here's the shape of it, without me pretending there's one formula, because there isn't. The investor totals your eligible documented liquid assets, frequently discounts higher-volatility or less-liquid holdings so the figure is conservative, and then divides the result by a number of months to produce the monthly income the file qualifies on. Which accounts are eligible, whether retirement assets count and on what terms, the size of any haircut, and the divisor itself are all investor overlays, not a public rulebook. The minimum assets a program requires is also an overlay. Asset-based / asset-depletion loan: qualifies from documented liquid assets converted to a qualifying income stream; this is NOT a no-income loan - the assets are the documented basis and ATR applies. So I read the current program's actual method against your real statements rather than hand you a formula or a minimum as if it were a law. How underwriters calculate income on the full-documentation path, the two-year average and add-backs, is a separate topic explained on my how self-employed income is calculated guide.
Is an asset-based loan a no-income or no-doc loan?
No. An asset-based loan is alternative documentation, not no documentation. Your assets are the documented basis: the lender verifies your account statements, and the federal Ability-to-Repay rule still applies, so qualification is verified before the loan is made.
This is the single most important thing to understand about these loans, and the place the most confusion lives. The old no-doc, stated-income, and no-income-verification products from before 2010, where a borrower could simply assert a number with nothing behind it, are effectively prohibited today. An asset-based loan is not a revival of those. The fact that it doesn't lean on employment income does not make it a no-income loan: it qualifies you from assets you actually have and can prove, converted to a qualifying figure by a documented method. Ability-to-Repay (12 CFR 1026.43, the CFPB ATR/QM rule) applies to non-QM loans: the borrower's income and ability to repay IS verified through alternative documentation. Non-QM means not a Qualified Mortgage, NOT no underwriting. Never imply ability to repay is not assessed. So when you see one of these described as "no income verification," that description is wrong: your assets and your ability to repay are verified, just through your statements rather than your pay stubs. I lead with this because borrowers sometimes arrive expecting a loan with no paperwork, and I'd rather set the honest expectation up front than surprise you in underwriting.
Who is an asset-based loan for?
It's for asset-rich borrowers with substantial documented liquid assets and income that's hard to document the ordinary way: retirees living off a portfolio, high-net-worth buyers, and business owners between income events. If your wealth is real but your current income statements don't tell that story, this is the program built for your situation.
But I want to be straight with you: an asset-based loan is not the automatic first move, and any honest loan officer will tell you that. My first job is to see whether your file qualifies the full-documentation way, on a conventional, FHA, or VA loan, which is usually the more affordable route, including reading any self-employment returns the way underwriting does. Non-QM rates are generally higher than conventional, so reaching for an asset-based loan when a full-doc file would have qualified costs you money you didn't need to spend. The asset-based loan earns its place when your real qualification genuinely lives in your assets rather than your current income, not as a default to grab first. And if you're a real estate investor who wants a rental property's cash flow to qualify the loan instead of your personal finances, that's a different product, a DSCR loan, covered in my DSCR loan guide rather than built here.
How is an asset-based loan different from bank statement, 1099, and P&L loans?
The difference is the qualifying basis. An asset-based loan qualifies from your documented liquid assets; a bank statement loan qualifies from your bank deposits; a 1099 loan qualifies from your 1099 forms; a profit-and-loss loan qualifies from a prepared P&L statement. All four are alternative documentation, all four have ability-to-repay applied, and none of them is a no-doc loan.
Think of them as four doors into the same house. If your business deposits tell the real story, a bank statement loan fits. If you're paid on 1099s as a contractor, a 1099 income loan may qualify you from those forms. If you have clean books and a preparer relationship, a profit-and-loss (P&L) statement loan qualifies from a CPA-or-licensed-preparer-prepared P&L. And if your qualification genuinely lives in your accounts, an asset-based loan is the door. The full map of both paths, plus what you'll need to gather, lives on my self-employed requirements guide, and the self-employed mortgage hub ties them together. Which door fits is exactly the conversation worth having before you apply.