Mortgages for High Net Worth Borrowers – Do You Need to Show Income to Qualify for a Home Loan?High net worth borrowers who buy a home and finance it with a mortgage may think their assets are sufficient to qualify for the loan. However, most lenders require that they must show an income stream using tax returns to qualify for the mortgage under today’s more stringent “Ability to Repay” guidelines (ATR) – how you like them apples?
The income stream can in fact come from the borrower’s assets, but there are specific stipulations regarding the income stream. Some lenders do offer an “asset utilization or asset depletion” method to provide a hypothetical income stream using their “post-closing” assets. This method varies from lender to lender and some lenders do not utilize this method at all.
Do You Need to Show Income to Qualify for a Home Loan
High Net Worth Borrowers Must Show Income
Earlier this week, my preferred lender Joe Tishkoff with Skyline Home Loans had a call from a retired high net worth client of mine. Of course, because he had significant assets in the bank, he thought the loan process would be very simple. However, what you need to realize is that even if you have a lot of assets in the bank or in an investment account, lenders will look separately at your assets versus the income on your tax returns. Assets alone do not qualify you for a mortgage unless those assets produce a significant taxable income or the borrower has a large investment portfolio and applies for a home loan with a lender who utilizes the asset depletion method of qualifying. You still have to demonstrate that you have an income source with which to pay back the mortgage with today’s qualifying guidelines.
Create Income from the Assets
This is doable with a high net worth individuals by creating an income stream from the assets that they have. Conventional loans have certain requirements that must be met to create that income stream. The distribution from the retirement funds, for example, has to be previously received to be used in qualifying to establish a history of those distributions. You also have to demonstrate that you have sufficient assets in the account to receive that distribution for at least the next three years. And, in most cases, the lender is going to require a letter from the retirement plan administrator indicating that these are ongoing distributions – are you getting sleepy yet? Read on.
Do You Need to Show Income to Qualify for a Home Loan
Take Initial Distribution before Beginning Loan Process
So, while these are not necessary insurmountable obstacles you cannot overcome to qualify for a mortgage, it’s a good thing to know about in advance so you can prepare and have that initial distribution made before you begin the loan application process. Speak to your business manager or wealth planner and give them an understanding of the type of documentation you’re going to need from them. It’s best to engage your loan officer to speak directly with your wealth manger or financial planner in advance. Make sure that your asset accounts have sufficient funds to support the continuation of your distributions. Make sense?
Conclusion
If you fit this situation and would like to hear more on this topic, please give my trusted lender Joe Tishkoff with Skyline Home Loans a call at 877-995-1700, email home at JoeTishkoff@skylinehomeloans.com and feel free to visit his website at www.JoeTishkoff.SkylineHomeLoans.com.
Your Beverly Hills Real Estate Expert
I’m a local real estate agent with The Shelhamer Real Estate Group and It would be my pleasure to help you find the perfect property to call home in Beverly Hills CA, or if you’re thinking about selling a house, condo, or multi-family building in, Beverly Hills, Bel Air, Westwood, Culver City, or West Hollywood, it would be a privilege to help you get top dollar for the sale of your property.
Let’s chat sometime. 310-913-9477 or contact me.
