Asset Depletion Mortgage Basics for Florida Retirees

Retirement can make a mortgage application look strange. You may have substantial assets and a solid housing plan, but less monthly employment income than you had before leaving work. Asset depletion is one way a lender may convert eligible assets into qualifying monthly income for underwriting.

The name is a little misleading. It does not necessarily mean you must spend down the account every month. It describes an underwriting calculation that spreads eligible net assets across a defined period. The lender then evaluates that calculated income with your other income, debts, credit, property, and loan terms.

There is no single asset depletion rule for every mortgage. Agency guidelines, portfolio programs, and lender overlays can use different assets, discounts, loan limits, occupancy rules, and formulas. This guide uses Fannie Mae's current employment-related asset option as a verified example, then shows what Florida retirees should compare.

What Is Asset Depletion Income?

Asset depletion income is a calculated monthly amount based on eligible assets that remain after required reductions. It may help a borrower qualify when traditional recurring income does not tell the whole financial story.

It is not the same as documenting an existing pension, Social Security benefit, annuity payment, required minimum distribution, interest, or dividend income. Those sources have their own documentation and continuance rules. A good loan review should compare the available income methods instead of forcing every asset into one formula.

How Fannie Mae's Current Formula Works

Fannie Mae calls its agency option "employment-related assets as qualifying income." Under the Selling Guide published August 5, 2026, the lender calculates net documented assets by subtracting applicable full-distribution penalties and funds needed for down payment, closing costs, and required reserves. The lender divides the result by the loan's amortization term in months.

Net documented assets divided by the loan term in months equals monthly qualifying income.

For a 30-year loan, the divisor is generally 360 months. A shorter amortization term uses its applicable number of months. This is a qualifying-income calculation, not a recommendation to liquidate retirement assets or a forecast of investment performance.

A Simple Asset Depletion Example

Assume an eligible retirement account contains $700,000. For this illustration, assume $70,000 must be deducted for an applicable distribution penalty and $90,000 is needed for down payment, closing costs, and required reserves.

Starting eligible assets: $700,000.
Minus assumed distribution penalty: $70,000.
Minus funds required for closing and reserves: $90,000.
Net documented assets: $540,000.
$540,000 divided by 360 months: $1,500 in calculated monthly income.

The actual deduction is not automatically 10%. It depends on the account, the borrower's access, and the penalty that would apply at the time of calculation. Taxes, withholding, liquidation treatment, and lender overlays require a file-specific review.

Which Assets May Be Eligible?

For Fannie Mae's employment-related asset option, potentially eligible sources include certain 401(k), IRA, SEP, and Keogh retirement accounts when the borrower has unrestricted access. A qualifying non-self-employed severance package or lump sum retirement distribution may also be considered with the required documentation.

Ownership matters. The assets must be owned by the borrower, or a co-owner generally must also be a co-borrower. The lender must verify that the assets are liquid, available, properly sourced, and documented with current statements or distribution records.

Fannie Mae specifically identifies several assets as ineligible for this calculation, including non-employment-related stock options, non-vested restricted stock, lawsuit proceeds, lottery winnings, real estate sale proceeds, inheritances, divorce proceeds, and virtual currency. Checking and savings balances generally do not qualify unless they can be traced to an eligible employment-related source.

Unrestricted Access Is a Major Gate

A large account balance is not enough. For a 401(k), IRA, SEP, or Keogh account, Fannie Mae requires the borrower to have the unqualified and unlimited right to request distribution of all funds, even if taxes, withholding, or penalties could apply.

An account restricted by current employment, vesting, plan rules, or another owner's rights may not work. The lender will review the account type, ownership, access, asset composition, and whether distributions are already established.

Current Fannie Mae Loan Limits for This Method

Under the verified Fannie Mae guide section, this specific employment-related asset method is limited to purchase and limited cash-out refinance transactions for principal residences and second homes. It is not the agency path for investment properties or cash-out refinances.

The maximum loan-to-value, combined loan-to-value, and home equity combined loan-to-value ratio is 70%. It may increase to 80% when the owner of the assets used to qualify is at least 62 at closing. For jointly owned assets, all owners must be borrowers, and the borrower using the income must meet the age requirement.

These are Fannie Mae parameters for this specific income method, not a promise that every lender offers it. Automated underwriting findings, lender overlays, property eligibility, credit, debt-to-income ratio, reserves, and the complete file still control the decision.

Asset Depletion Is Not the Only Retirement Income Path

Before using asset depletion, check whether the file can document income through a simpler or stronger method:

Social Security benefits.
Pension or annuity income.
Regular retirement account distributions.
Interest and dividend income.
Trust income.
Part-time, consulting, or self-employment income that meets the applicable history and documentation rules.

The same dollars should not be counted twice. If assets support one qualifying income stream, the lender must make sure those assets are still available and are not also being used inconsistently for closing, reserves, or another income calculation.

Documents to Gather Before the Loan Review

Most recent statements for each retirement and investment account.
Account ownership, vesting, and withdrawal-access terms.
Documentation for any existing recurring distributions.
Pension, annuity, Social Security, trust, interest, and dividend records.
A realistic estimate of down payment and closing costs.
Current mortgage, tax, insurance, HOA, and debt information.
Documentation for large transfers or recently liquidated employment-related assets.

Keep account statements complete. Missing pages, hidden account numbers, unexplained transfers, or screenshots without ownership details can slow the review.

Florida Costs Can Change the Math

Qualifying income is only one side of the file. Florida property taxes, homeowners insurance, wind coverage, flood insurance, condo dues, and special assessments can raise the monthly housing obligation.

Use a current insurance quote and a realistic post-purchase tax estimate before deciding the payment works. Read how Florida property taxes can change after a sale and how homeowners insurance can affect mortgage approval. If the file needs a cash cushion, review the Florida mortgage reserves guide.

Questions to Ask the Loan Officer

Which exact agency or lender asset depletion guideline are you using?
Which accounts are eligible, and what access documentation is required?
What penalties, discounts, closing funds, and reserves will be deducted?
What divisor will the lender use?
Can recurring distributions, pension, Social Security, interest, or dividends qualify instead?
Are any assets being counted twice or excluded because they are needed for closing?
What loan-to-value, occupancy, property, age, credit, and reserve limits apply?
Does the lender add an overlay beyond the agency guideline?

When comparing options, look beyond the headline rate. Review APR, points, lender credits, third-party fees, cash required, and the long-term effect on liquidity. The mortgage quote comparison guide gives you a clean checklist.

Retirement Planning and Mortgage Approval Are Different Decisions

A lender can determine that an asset is usable for mortgage qualification. That does not mean using or pledging those funds fits your retirement plan. Market risk, taxes, withdrawal penalties, sequence-of-returns risk, liquidity needs, estate planning, and health expenses sit outside the mortgage approval.

Coordinate the mortgage structure with your financial adviser, tax professional, and attorney when those issues apply. A mortgage professional should explain the underwriting math and loan terms, not pretend to replace those advisers.

The Bottom Line

Asset depletion can help a Florida retiree show qualifying income from eligible assets when ordinary monthly income does not reflect the full financial picture. The useful number is not the account balance. It is the eligible balance left after access rules, penalties, closing funds, and reserve requirements are applied, then divided under the correct program formula.

Start with the complete asset and income picture. Compare asset depletion with existing retirement distributions and other standard income methods. Then test the actual Florida payment, cash required, and post-closing liquidity before choosing the loan.

This article is general mortgage education, not legal, tax, financial, retirement-planning, or investment advice. Guidelines and lender overlays can change. Eligibility, income, and approval require review of the complete application and supporting documents.

Sources

Fannie Mae Selling Guide B3-3.4-06, Employment Related Assets as Qualifying Income, guide topic dated March 4, 2026, Selling Guide published August 5, 2026, accessed August 22, 2026.
Fannie Mae Selling Guide B3-4.3-03, Retirement Accounts, Selling Guide published August 5, 2026, accessed August 22, 2026.