Key Features of Asset-Based Loans
Asset-based loans offer a range of features tailored for California's competitive housing market:
- Qualification Based on Your Assets: A flexible method for individuals with substantial assets income.
- No Income or Job Verification: Simplifies the application process for borrowers and asset-rich individuals.
- No Change of Asset Ownership: No pledging and No re-titling of your stocks, bonds, ETFs, IRA, 401(k) or bank accounts.
- Suitable for Luxury Homes: Ideal for California’s high-cost homes helping borrowers qualify for more.
Who Should Consider an Asset-Based Loan?
Ideal For |
Benefits |
Californians with Liquid Assets over $500k |
Utilize your savings and investments instead of traditional income documentation. |
Self-Employed & Entrepreneurs |
Qualify without your commission or business income focusing instead on your asset account balances. |
Investors |
Access to home financing with your assets and not your full-time job. |
Retirees |
Leverage your investments from a 401(k), IRA, CDs, & savings accounts as qualifying income. No job required |
How Asset-Based Loans Work in California
Here’s a simple breakdown of the process:
Step 1: The Underwriter & loan originator reviews your liquid asset accounts.
Step 2: We calculate your maximum borrowing potential based on asset account values (not your personal income), age and personal debts.
Step 3: You receive an offer based on the calculated value of your qualifying liquid assets
Asset-Based Loan Qualification Criteria
To help you understand whether you qualify, here are the basic requirements and factors considered in asset-based home lending:
Liquid Assets & Credit- – Checking, savings, CD or money market
- – Stocks, bonds, ETFs, or Mutual Funds
- – IRA's, 401(k), HSA
- – Credit scores above 680
Eligible Property & Usage- – Detached home, condo, townhome or duplex
- – Primary home or vacation home
Loan amount- – Varies up to $3 million
- – Up to 90 LTV on $2 million
- – Up to 80 LTV on $3 million
Your application may be declined if you have:- – Recent deposits difficult to source
- - Funds not in the account for 90 days
Notes:
- If you are not 59 1/2 years old, your retirement account balances may be reduced by 30%.
- Your mortgage or rent payment history in the last 2 years should not show any 30-day late payments.
High net worth borrowers are attracted to Southern California
In San Diego, neighborhoods like Del Mar and Coronado draw those seeking luxury single-family homes or oceanfront condos. Del Mar offers a relaxed coastal vibe, beautiful beaches, and stunning views with home prices typically starting at $2 million.
Coronado, known for its historic charm and easy access to the beach, offers single-family homes and condos priced from $1.5 million and higher. North of San Diego, Rancho Santa Fe is another sought-after area where large estates and sprawling single-family homes start at around $3 million. These areas tend to attract high-net-worth buyers seeking a blend of luxury and tranquility.
Here’s an example below of how a high-net-worth buyer could use liquid assets to qualify for a loan on a luxury property in Southern California such as a $2.5 million single-family home in Del Mar.
Purchase Price: $2.5 million
Down Payment: $500,000 (20% of the purchase price)
Loan Amount: $2 million
Qualifying with Liquid Assets
Asset Requirements: Lenders often require either:
- a.) 60 months' worth of mortgage payments, taxes, and insurance and your personal debts.
- b.) your total qualified assets divided by 84 months, or
- c.) your total assets + reserves cover 150% of the loan amount.
Monthly Housing Expenses (Estimate):
Principal and Interest Payment (at an estimated 6% interest rate on a 30-year loan): ~$11,991 per month
Property Taxes and Insurance: ~$2,552 per month
Total Monthly Housing Expense: ~$14,543
The buyer would need to provide evidence of at least $873,000 in liquid assets. In addition, enough to cover the down payment ($500,000), reserves (9-12 months) $130,887, and closing costs (estimated at $36,000).
Total Liquid Assets Required: $130,000 (reserves) + $500,000 (down payment) + $36,000 (closing costs) = $1.54 million.
In this scenario, the buyer would qualify by demonstrating they have sufficient liquid assets to cover the required down payment, closing costs, and reserves to cover future payments. Asset-based qualification can be a powerful option especially for high-net-worth individuals with significant investments but irregular income.