I’m Michael DiVita (DRE #01372066 | NMLS #241655), DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. When the bank says no, I find a way. Call (800) 239-1103.
The short answer: a retiree living on Social Security and a pension bought a $685,000 home with 20% down before his old home closed escrow. His income couldn’t carry two mortgages, but he had a large amount in retirement savings. A newer lender program called asset utilization approved him on those savings alone, with no debt-to-income ratio and no income on the application.
The Problem: Two Houses, One Retirement Income
I closed this one this week. My borrower bought his new home before selling the old one. The old house was already in contract, but it wouldn’t close until a few weeks after the purchase.
That gap is where buyers get stuck. Even though the old mortgage was going to be off the books in a few weeks, the new lender still hits you with the debt. So on paper he had two mortgages, two sets of property taxes and two sets of insurance. His only income was Social Security and a pension. It wasn’t enough to support all of that.
What I’d Normally Do
What he did have was a large amount in retirement accounts. Usually I’d use a combination of the Social Security and pension plus asset depletion, which takes the eligible assets and divides them by 60 or 84 months to create extra qualifying income. That can work, but you still have to make the debt-to-income ratio fit with two houses on the books.
What We Did Instead: Asset Utilization
One of my newer lenders has a different version. They don’t take the assets and divide them by 60 or 84 months to come up with an income. They call it asset utilization. If the borrower has more than 125% of both mortgages combined in assets, they basically say yes to the loan.
- No debt-to-income ratio.
- No income on the application. We didn’t use his Social Security or pension at all.
- What they did want: six months of statements for the accounts holding the assets.
Other than that, it was a very easy file to close: a $685,000 purchase with 20% down.
What I Tell Retirees Buying Before They Sell
- Don’t assume your income has to cover both houses. If your savings are strong enough, there may be a way to qualify on assets alone.
- Asset depletion and asset utilization aren’t always the same thing. Lenders use the names differently. One version turns your assets into income. The other skips income altogether. Ask which one the lender means.
- Get six months of statements together early for every account you’ll use.
- Leave your accounts alone. Big transfers right before you apply are something the underwriter will want explained.
Banks lend from a small mold. This borrower didn’t fit theirs, but he was an easy yes for the right lender.
Frequently Asked Questions
Can I buy a new home before selling my old one on retirement income?
Yes. If your income can’t carry both mortgages, some lenders will qualify you on your savings instead. With an assets-only program, the lender looks at whether your eligible assets cover a set multiple of your mortgage debt rather than at your income.
What’s the difference between asset depletion and asset utilization?
Lenders use the names differently. Asset depletion usually divides your eligible assets by a set number of months, such as 60 or 84, to create qualifying income, then applies a debt-to-income ratio. Some lenders use asset utilization for an assets-only version: on this file, if the borrower had more than 125% of both mortgages combined in assets, the loan was approved with no debt-to-income ratio and no income on the application.
Does the lender count my old mortgage if my house is already in contract?
Yes. Until the sale closes, the new lender generally counts the old mortgage, property taxes and insurance along with the new ones, even if the old loan will be paid off in a few weeks.
What documents does an asset utilization loan require?
On this file, the lender wanted six months of statements for the accounts holding the assets. Requirements vary by lender.
Related Resources
- Asset Depletion Mortgages in California
- Bridge Loans in California: Buy Before You Sell
- Non-QM Mortgages in California
- Debt-to-Income Ratio for a California Mortgage
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | In lending since 2000, founded DiVita Home Finance in 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
📞 (800) 239-1103
💬 Text: (310) 849-9124
