The Asset Depletion Formula: Why the Divisor Is 84, and What It Does to Your Number

What is the asset depletion formula?

The asset depletion formula is the calculation a mortgage underwriter uses to turn a borrower's liquid wealth into a monthly income figure: net eligible assets divided by a fixed number of months. On the AR Loan at Mbanc Private Client Lending, that number is 84.

Monthly qualifying income = (eligible assets less funds to close less required reserves) / 84.

Each term has a precise meaning. Eligible assets are documented balances valued per the investor guideline for your file: checking, savings, money market, CDs and short Treasuries at 100%; publicly traded stocks, bonds and mutual funds at 70% to 80%; retirement accounts at 60% to 80%, depending on your age. Funds to close are the down payment and closing costs. Required reserves are months of PITIA (principal, interest, taxes, insurance and association dues) that must remain liquid after closing: 3 months on loan amounts to $1,500,000, 9 months on loan amounts over $1,500,000, 12 months over $2,500,000. After the set-aside, eligible assets must be at least the lower of $1,000,000 or 150% of the loan amount.

The terms asset depletion and asset utilization are often used interchangeably. The method exists because the federal Ability-to-Repay rule, on a home you live in, requires every lender to make a reasonable, good-faith determination that a borrower can repay, and for someone who lives on capital rather than salary, the balance sheet is the honest evidence. The broader program context is in the guide to qualifying for a jumbo loan using assets.

Why divide by 84?

Eighty-four months is seven years, and it is the divisor Mbanc's guideline sets for the AR Loan. The guideline does not publish a rationale, and we will not invent one. What we can show is what the choice does: a shorter divisor produces more monthly income from the same assets, and 84 is far shorter than the divisors agency programs use.

Fannie Mae's Selling Guide allows certain retirement and employment-related assets to be used as income by dividing net documented assets by the amortization term of the loan in months, such as 360. Freddie Mac's guide divides net eligible assets by 240; its Bulletin 2026-10 lowers that to 180 for loans settling on or after 3 February 2027, and lenders may use 180 sooner. Both agency methods also restrict which assets qualify; Fannie Mae's, for example, generally excludes ordinary checking and savings balances unless they came from an eligible employment-related source.

There is a second, structural reason the agency divisors rarely matter at this desk's loan sizes. Agency programs fund conforming loans, and the 2026 baseline conforming limit is $832,750, with a high-cost ceiling of $1,249,125. A borrower who needs a $2,000,000 loan amount is outside those programs whatever divisor they use. The AR Loan is a non-QM jumbo: on a home you live in it must still satisfy Ability-to-Repay, but it is underwritten to its own guideline rather than to agency rules (see non-QM jumbo vs. conventional jumbo).

How do you calculate asset depletion income, step by step?

Value each account, total them, subtract funds to close and reserves, divide by 84, then test the result against your debts. In order:

1. List every account you intend to count, with its current documented balance.
2. Apply the valuation the investor guideline for your file sets: 100% for cash, money market, CDs and short Treasuries; 70% to 80% for stocks, bonds and funds; 60% to 80% for retirement accounts, depending on your age.
3. Subtract the down payment and estimated closing costs.
4. Likewise, subtract required reserves: 3 months of the new PITIA on loan amounts to $1,500,000, 9 months on loan amounts over $1,500,000, 12 months over $2,500,000.
5. Check the floor: what remains must be at least the lower of $1,000,000 or 150% of the loan amount.
6. Divide the remainder by 84.
7. Add every monthly debt on the credit report to the new PITIA, and divide by the step 6 income. The result must be 50% or less.
8. Subtract total monthly debt from the step 6 income. The remainder must be at least $1,500.

Notice how close step 7 came. Had the existing home carried a larger payment, DTI would have passed the 50% cap and the file would not qualify as structured. The fixes would be ordinary ones: a larger down payment, a smaller loan amount, or retiring a debt.

How much monthly income do different asset levels produce?

Every $1,000,000 of net eligible assets produces about $11,905 of monthly qualifying income on an 84-month divisor, and supports about $5,952 of total monthly debt at the 50% DTI cap. The table scales that relationship. Net means after valuation and after the set-aside.

Two cautions on reading the table. The debt column includes the new housing payment and every other obligation on your credit report. And on an interest-only loan, the housing payment used is the fully amortizing one, not the interest-only payment, so the column must carry the larger number. That rule is explained in how interest-only jumbo loans are qualified.

Does dividing by 84 mean I have to spend my assets in seven years?

No. The divisor is a measuring stick, not a withdrawal schedule: nothing in the AR Loan requires you to draw down, sell or move a single account, before or after closing.

The word depletion causes the confusion. It describes a hypothetical: if this borrower drew the assets down evenly, how much could they spend each month for seven years? The underwriter uses that hypothetical to size a payment, then steps away. In reality, your portfolio stays invested, and if it earns a return, it may well be larger in seven years than it is today. You also continue to pay the mortgage from whatever source you choose: portfolio income, distributions, business income or a future sale.

What the formula does assume is that the assets are available and that their value can move. That is why the investor guideline counts publicly traded securities at 70% to 80% and retirement money at 60% to 80% rather than 100%, and why it subtracts the money you will spend at closing. It is also why a file built on assets you cannot reach, such as unvested equity or a sale that has not closed, does not work. Which accounts are typically considered is set out in the asset depletion calculator.

What is the reverse calculation: how much in assets do I need?

Multiply your total monthly debt, including the new PITIA, by 168, then add the set-aside. That is the minimum eligible balance at the 50% DTI cap; it is derived arithmetic, because income must be at least twice the debt and each dollar of income takes $84 of assets.

For example, take total monthly debt of $15,000, the new PITIA and other debts together: $15,000 x 168 = $2,520,000 of net eligible assets. On a $1,800,000 loan amount, the down payment, $55,000 of closing costs and 9 months of PITIA in reserves come to a set-aside of $622,000. Minimum eligible assets after valuation: $2,520,000 + $622,000 = $3,142,000, which also clears the guideline floor of the lower of $1,000,000 or 150% of the loan amount. Valuation makes the gross balances larger still where the guideline counts an account at less than its full balance, as it can for brokerage and retirement accounts.

We run this calculation on the first call, because it answers the question most people are actually asking: not what my assets produce, but whether they are enough for the home I have in mind.

What are the most common asset depletion mistakes?

The most common mistake is dividing the gross balance by 84 and forgetting the set-aside; the second is counting retirement accounts at full value. Both overstate income, and both are caught in underwriting, so it is better to catch them on the call.

• Skipping the set-aside. On a $2,500,000 loan amount, the down payment, closing costs and reserves can easily exceed $700,000. Ignoring them overstates monthly income by more than $8,000.
• Valuing brokerage at face value. Where the guideline counts publicly traded stocks and funds at a share of their balance, the part it does not count, say $400,000 in this illustration, is about $4,762 of monthly income that does not exist.
• Valuing retirement at full value. Where the guideline counts retirement accounts at a share of their balance that depends on your age, the part of a 401(k) it does not count might be worth $7,143 of monthly income at 59 1/2 or older and $10,714 younger, in this illustration.
• Counting gift funds. Gifts are not permitted on the AR Loan, toward either the set-aside or the formula.
• Counting money that has not arrived. Escrow holdbacks, earnouts, pending distributions and sale proceeds not yet deposited are not documented balances.
• Counting borrowed money. A line-of-credit draw in checking is offset by the debt that created it, and its payment counts against you.
• Qualifying on the interest-only payment. Non-DSCR files are qualified on the fully amortizing payment.
• Forgetting other debts. Every mortgage, auto loan and revolving balance on the credit report enters the DTI.

When does the asset depletion formula work against you?

The formula works against you when your documented annual income is larger than about one-seventh of your net eligible assets. That threshold is derived arithmetic: assets / 84 per month equals assets / 7 per year, so if your deposits or 1099 receipts already exceed that figure, another program reads you more generously.

Take a business owner with $2,100,000 of net eligible assets and $720,000 a year of qualifying business deposits after the expense factor. The AR Loan produces $25,000 of monthly income ($2,100,000 / 84). The Founder Loan, reading 12 or 24 months of bank statements, produces $60,000 of monthly income ($720,000 / 12). For that borrower, assets are the supporting evidence, not the main event; the comparison is in bank statement jumbo vs. asset-based jumbo.

The formula is also the wrong tool if most of your wealth is in real estate or a private company, if your loan amount is under $1,000,000 (the core Mbanc desk handles those), or if a clean W-2 already qualifies you for a conventional jumbo, which will usually price better. Mbanc Private Client Lending, the $1,000,000-minimum desk of Mortgage Bank of California Inc. dba Mbanc, will say which program fits on the first call, and Mayer Dallal makes that call himself. The program summary is on the asset-based jumbo loans page.