Utilizing Qualified Assets for Mortgage Approval: A Non-QM Solution for Self-Employed Borrowers

Dec 11, 2023

Self-employed individuals often face challenges when it comes to qualifying for a loan. We offer a non-qm loan program called asset utilization allowing the utilization of qualified assets to qualify for a mortgage. In this scenario, we explore how a borrower with 16 months of self-employment and a 722 FICO score successfully purchases a second home using their assets for qualification.

The Borrower’s Situation:

Our borrower, despite not meeting the 2-year self-employment rule, is determined to purchase a second home. With a purchase price of $500,000 and a desire to put 25% down, they face the obstacle of traditional income verification. However, their financial profile includes $1.2 million in a retirement account and $500,000 in stock investments, providing a potential solution.

Non-QM Solution:

To overcome the self-employment hurdle, we offer a non-qm asset utilization program, which allows borrowers to utilize their qualified assets for income calculation. This innovative approach considers various personal assets to determine the borrower’s ability to handle the new loan, down payment, closing costs, required reserves, and existing monthly obligations.

Qualified Assets and Income Calculation:

Under this non-QM solution, certain personal assets are considered qualified assets and can be utilized to calculate income. The following percentages are applied to different asset types:

  •  Checking, Savings, and Money Market Accounts: 100% of the value is considered.
  • Stocks and Bonds: 80% of the remaining value is considered.
  • Retirement Assets: 70% of the value is considered.

By incorporating these qualified assets, the borrower’s financial strength is assessed based on their ability to cover the necessary financial obligations associated with the mortgage.

Benefits of the Total Asset Calculation Option:

Unlike traditional debt ratio calculations, the total asset calculation option does not require employment and income disclosure on the Uniform Residential Loan Application (URLA). This flexibility allows self-employed borrowers to leverage their assets without the constraints of traditional income verification.

For self-employed individuals who do not meet the 2-year self-employment rule but possess substantial qualified assets, our asset utilization mortgage product offers a viable path to homeownership. By considering qualified assets for income calculation, borrowers can overcome traditional income verification challenges and secure a mortgage for their dream home. Contact us today for more information about our asset utilization mortgage program.

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