Woohoo! Rates fell today from 7.5% yesterday to 7.49% today! 😊 Refi boom? Probably not… but at least rates didn’t go up today.
Brief Outline of Asset-Based Loans – Now Better Than Ever! (See Freddie Mac’s Program Below!!)
A. Higher Asset Values + More Flexible Lending = More Ways to Qualify!
One good thing about the inflation that is driving rates higher is that it also pushes asset prices higher.
The one good thing about rates going through the roof is that it forces lenders to get creative and to offer increasingly more flexible loans to maintain volumes.
So, when we marry high asset prices with far more flexible lending, we get numerous loan products that let borrowers qualify for mortgages with assets alone.
No income documents are necessary!
B. Eligible Assets
Eligible assets include publicly traded stocks, bonds, cash, money market accounts, cash value of life insurance, and portions of retirement accounts.
C. Types: Asset Depletion vs. Assets Held
- Asset depletion loans amortize eligible assets remaining after close of escrow (after down payment and closing costs) over a period of months, e.g., 60 to 240 months.
- Asset-held loans simply require borrowers to hold enough assets to cover a minimum number of payments, e.g., 60.
NOTE: The more flexible the guidelines, the higher the rate.
D. Down Payments as Low as 10%!
Borrowers can qualify with assets alone and put down as little as 10%. Lower-rate programs, however, require 20 to 30% down.
E. Can Combine Asset Depletion With Regular Income
Borrowers can combine both types of income to qualify for a much larger mortgage.
For example, a borrower with $10,000 per month of W-2 income and $2 million of eligible assets could have over $21,000 of “qualifying income” with Freddie Mac’s asset depletion program, described below – which is now more flexible than ever!
F. Freddie Mac’s Asset Depletion Program = Awesome!
We love Freddie’s program for many reasons:
- It gives us full access to Freddie’s low conforming rates.
- We can combine the asset depletion income with regular W-2 income to vastly increase qualifying amounts (see above).
- We can use this program for any property type – primary, investment, 2nd home.
- We can amortize assets over 180 months now (used to be 240 months).
TLDR: Borrowers are sitting on more eligible assets than ever, and even $500,000 can help a borrower qualify for a mortgage they could never have dreamed of as recently as the pre-COVID era.
