Asset Depletion vs Bank Statement Loans: What’s the Right Choice?

What Is an Asset Depletion Loan?

An asset depletion loan is a type of mortgage that lets you qualify based on your liquid assets rather than your income. It's designed for borrowers whose financial strength lies in their wealth, not in a traditional paycheck. These loans open the door to homeownership for people who may be retired, between ventures, or earning irregular income from investments, royalties, or business distributions.

Rather than relying on W-2s or tax returns, lenders evaluate your overall asset position—looking at your bank accounts, investment portfolios, retirement savings, and more. From there, they determine a hypothetical monthly income by 'depleting' those assets over a set period, typically 10 to 30 years. Think of it as transforming your balance sheet into a steady income stream on paper. This approach allows you to qualify for a mortgage using the financial resources you've already accumulated—without having to sell off assets or rely on complex tax documentation.

Common Use Cases of Asset Depletion Loans

Asset depletion loans are ideal for borrowers who may not receive traditional income but have substantial wealth or assets working for them. Here are a few examples of who benefits most:

• Retirees living off investments: Whether drawing from IRAs, 401(k)s, or brokerage accounts, retired buyers often have the assets—but not the taxable income—needed to qualify through traditional methods.

• High-net-worth individuals with no active income: Those who live off dividends, interest, or long-term holdings can leverage their wealth to secure financing.

• Recently exited founders or business owners: After selling a company or cashing out of a major liquidity event, entrepreneurs often want to purchase property before their next venture generates income.

• Trust fund recipients: Individuals with irregular or passive income streams can use their asset base to qualify without W-2s or tax returns.

Now let’s look at how it actually works.

How Asset Depletion Loans Works

The lender takes your qualified assets (like bank accounts, stocks, bonds, retirement funds, and sometimes even crypto), subtracts any down payment and reserves, and then divides the remaining amount by a set amortization period—usually by 240 to 360 months. However, with LendFriend's Asset Depletion Program, we can use a amortization period of just 60 months to boost your income exponentially!

Example:

If you have $5,200,000 in qualified assets:

• $1,000,000 is set aside for down payment and reserves

• Other Lenders: Remaining $4,200,000 is “depleted” over 360 months

  • Qualifying monthly income = $11,666/month
  • Estimated eligible mortgage: ~$500,000-700,000 

• LendFriend: Remaining $4,200,000 is “depleted” over just 60 months

  • Qualifying monthly income = $70,000/month
  • Estimated eligible mortgage: Up to $3M

Bottom Line for Asset Depletion Mortgages

Asset Depletion Mortgages can be a powerful tool, especially when you work with the right lender. By working with LendFriend, you can boost your eligible home shopping budget from $1.5M to $4M. And while you might not want to buy a $4M home, you can still buy a $2M home, which would be out of reach under a traditional lender's income calculation.

This is the kind of scenario where wealth truly works in your favor—even if you don’t have traditional income to show for it.

What Is a Bank Statement Loan?

A bank statement mortgage is a flexible loan option for borrowers who earn solid income but may not report it in the traditional way. This program is designed especially for self-employed individuals, freelancers, and small business owners who have strong cash flow but deduct business expenses on their tax returns or have fluctuating income.

Instead of relying on W-2s or tax returns, lenders use 12 to 24 months of business or personal bank statements to analyze your cash flow. They review monthly deposits and apply an expense factor—typically between 15% and 40% depending on the letter provided by your CPA—to estimate your qualifying income. The result is a realistic, lender-approved income calculation based on the money actually coming into your accounts.

Bank statement loans are especially useful for those who:

• Reinvest heavily in their business

• Take irregular distributions

• Prefer to keep their tax filings conservative

This loan type empowers financially successful but non-traditional earners to buy homes, refinance, or invest—without needing to rework their entire financial strategy.

Common Use Cases of Bank Statement Loans

Bank statement loans are tailored for successful individuals whose income doesn't fit neatly on a tax return. They’re a perfect fit for:

• Self-employed business owners with fluctuating income: Whether you run a local business or a national brand, your deposits reflect your earning power—even if your tax returns don’t.

• Freelancers, gig workers, and contractors: If you work on a project basis or across multiple platforms, bank statements offer a clear view of your cash flow.

• Entrepreneurs who reinvest heavily in their companies: Many small business owners write off large expenses to grow their business. These loans recognize top-line revenue rather than net profit.

• Buyers who write off significant business expenses: If your AGI is low due to legal deductions, bank statement loans let you qualify based on real revenue.

Now let’s take a look at how they work behind the scenes.

How Bank Statement Loans Works

Let’s say your business bank statements show an average of $20,000 in monthly deposits over the past 12 months. The lender applies a standard expense factor—often 20%—to account for overhead and operating costs. That means 80% of your gross deposits are considered qualifying income.

In this example:

• $20,000 × 0.80 = $16,000/month qualifying income

Now let’s translate that into homebuying power.

Assuming:

• Interest rate: 6.5%

• Property taxes and insurance: 3% annually (0.25% monthly)

• Maximum allowed DTI: 43%

With $16,000/month in qualifying income:

• Max monthly housing payment (PITI) = $16,000 × 0.43 = $6,880/month

This puts you in the range to comfortably afford a home priced around $1.15M to $1.4M, depending on how much you put down and your interest rate.

Best of all? There’s no need for tax returns, CPA letters (other than to obtain your expense ratio), or complicated income verification. Just clean, consistent deposits—backed by smart cash flow—and you’re on your way.

Side-by-Side Comparison: Asset Depletion vs. Bank Statement Loans

Which Non-QM Loan Is Right for You?

Here’s a quick guide to help you decide which non-traditional mortgage solution fits your financial profile—whether you're buying a jumbo home with assets or qualifying for a jumbo mortgage without tax returns.

Choose Asset Depletion If You:

• Have significant savings or investments: If your wealth lives in your brokerage accounts, retirement funds, or trust accounts—and not in a paycheck—an asset depletion mortgage lets you turn those assets into qualifying income.

• Are recently retired or between business ventures: Just exited a company? Taking a career break? If you don’t have active income but your portfolio is solid, you can still qualify for a competitive home loan.

• Want to avoid sharing tax returns or business statements: High-net-worth borrowers often prefer privacy. Asset depletion loans allow you to skip the documentation maze and avoid disclosing personal tax strategies.

Choose Bank Statement Loans If You:

• Are actively self-employed: Whether you're a sole proprietor, LLC, or run a multi-member S-corp, bank statement loans allow you to qualify for a mortgage using your real deposits—without W-2s or pay stubs.

• Have strong deposits but low taxable income: If you write off heavily on your tax returns to lower your AGI, bank statement loans let you qualify based on top-line cash flow instead.

• Deduct heavily for tax purposes: You shouldn’t be penalized for following the tax code. These loans are designed for smart business owners who legally minimize taxable income but still earn enough to afford a mortgage.

Sometimes, a hybrid approach works best—using asset depletion for reserves and bank statements for income. A broker like LendFriend can help structure the loan in your favor.

Real-Life Examples of Asset Depletion vs Bank Statement

Case Study #1: Retired Tech Executive Buys in Austin

A 62-year-old tech executive recently retired and relocated to Austin, Texas. With $3.6M in liquid assets (after her downpayment) but no active W-2 income, she was turned away by a major bank that couldn’t approve her without tax returns.

Using an asset depletion mortgage, she qualified for a jumbo loan based entirely on her brokerage and retirement accounts. Her simulated income of $60,000/month gave her the buying power to purchase a $3.2M home in Westlake Hills—with no need to liquidate investments or provide traditional income documentation.

Case Study #2: Self-Employed Designer Moves to Houston

A 36-year-old freelance graphic designer based in Chicago wanted to relocate to Houston after scaling her online business. Despite earning over $20K/month, her tax returns showed a low adjusted gross income due to aggressive (but legal) write-offs.

By leveraging a bank statement mortgage, she used 12 months of personal bank deposits to qualify for a $1.2M jumbo home loan in The Heights—with no W-2s, tax returns, or CPA letters required. This case is a textbook example of how self-employed buyers can qualify for premium homes using real revenue instead of taxable income.

Why Work With a Mortgage Broker?

Big banks don’t always offer these types of loans—or worse, they attach them to high rates and rigid requirements. At LendFriend, we specialize in alternative loan strategies for financially successful clients who don’t fit the standard mold.

We help borrowers like this every single month—people who thought they'd exhausted every option until they talked to us.

• We shop multiple lenders for the best terms

• We structure deals that others can’t

• We close quickly, with personalized guidance every step of the way

Take it from one of our actual clients, Tassone, who left this glowing Google review:

"I had been looking for a house for 2–3 years, and while it was a journey as a business owner with a difficult financial situation, this company did what 6 others could not. They got me a jumbo loan based off my business income—and when I needed more, they just made it happen, twice. This process of funding can be extremely difficult and basically a blow to the ego, but Eric and his team are literally magicians. My fiancée and I are now closed on our dream house. I recommend them wholeheartedly."

Ready to See What You Qualify For?

Let’s make it happen. Schedule a call with me today or get in touch with me by completing this quick form, and discover how simple home financing can be—whether you’re leveraging assets or bank statements to get there.