An asset depletion mortgage lets a borrower qualify by converting savings and investments into monthly “income” through a formula. FHA has no such program. It does count documented retirement distributions, such as IRA and 401(k) withdrawals, pensions, and Social Security, as income when they are regular and expected to continue at least three years.
That difference decides whether FHA works for you. This article covers what FHA accepts, the 2026 loan limits and mortgage insurance numbers, and a worked Henrico County example. It also covers how Duane Buziak helps borrowers whose wealth sits in accounts rather than paychecks.
Asset Depletion Mortgages Defined, and Where FHA Draws the Line
In an asset depletion mortgage, the loan provider takes your eligible liquid assets, subtracts any funds needed for the down payment and closing, and divides the remainder by a set number of months. The result is “qualifying income,” a figure that exists only on the loan application. You may never withdraw a dollar of it. These products are typically non-QM, meaning they fall outside the standard Qualified Mortgage rules that govern most government-backed loans. Each provider sets its own formula, divisor, and eligible account types.
FHA does not use this formula. Duane Buziak is direct about this with borrowers: you cannot hand over a brokerage statement and have FHA divide it by 60 or 84 months. FHA underwriting follows HUD Handbook 4000.1, which asks what income you actually receive and can document.
That includes:
- Social Security retirement or disability benefits
- Pension payments
- Annuity payments
- Regular distributions from IRAs and 401(k) accounts
The common misconception is that a large balance qualifies you on its own. It does not. Savings still matter in an FHA file in two ways:
- They fund your down payment and closing costs.
- They show reserves, which are the months of housing payments you could cover after closing.
Reserves can strengthen an application that an automated underwriting system is reviewing. But assets are not a substitute for qualifying income. If your taxable income is low because you are retired, the practical question is whether you can document a distribution schedule that FHA will count. The next section covers how.
How FHA Counts Retirement Distributions and Asset Income
Under HUD Handbook 4000.1, retirement income can be used to qualify when it is documented as regular and is expected to continue for at least three years. The handbook’s income provisions are updated periodically, so confirm the current section wording in the HUD Handbook 4000.1 library before relying on any summary, including this one. The lender must also see that you have unrestricted access to the account.
What you document
- Account statements showing the current balance, typically the most recent two months.
- Proof of the distribution, meaning the amount and frequency. A standing withdrawal instruction or a history of deposits into your bank account works.
- Award letters for pension and Social Security income.
- Evidence the balance can sustain the withdrawals for the three-year minimum.
A short example
Suppose a retiree holds a $300,000 IRA and takes $2,500 a month. Three years of withdrawals is 36 months, or $90,000. The balance covers that comfortably, so the $2,500 counts toward qualifying income. If the same retiree held only $60,000, the balance would run out in 24 months, and the distribution would not meet the three-year test.
Common mistakes
- One-time withdrawals. A lump sum taken to buy a car or pay a tax bill is not a continuing income stream.
- Inaccessible funds. Money locked in an account you cannot draw on, or that carries restrictions, cannot support the distribution.
- Unsourced deposits. A large deposit with no paper trail triggers questions. If you moved money between your own accounts, keep statements showing both sides of the transfer.
- Counting the balance as income. Only the documented, recurring distribution counts, not the account total.
Underwriting varies by file, and an automated underwriting finding can change what additional documentation is requested. Getting your statements and distribution history organized before you apply shortens the process.
FHA Requirements at a Glance: Credit Tiers, 2026 Loan Limits, and MIP
The figures below were checked against HUD sources as of October 2026. Limits and premiums can change, so confirm them at the links shown before you act.
Credit score tiers
- 580 and above: eligible for the 3.5% minimum down payment.
- 500 to 579: requires 10% down.
Individual providers can set stricter minimums, called overlays, so a 580 score may qualify with one wholesale source and not another. Duane Buziak uses NoTouch Credit Pull, a soft pull with no hard inquiry, so you can review options before your credit is formally pulled.
2026 FHA loan limits (single-unit)
- Floor: $541,287
- Ceiling: $1,249,125
These apply to case numbers assigned on or after January 1, 2026, per HUD Mortgagee Letter 2025-23. Verified as of October 2026. Look up your county on the HUD FHA loan limits page.
Mortgage insurance premium (MIP)
- Upfront MIP (UFMIP): 1.75% of the base loan amount, which can be financed (HUD Mortgagee Letter 2015-01).
- Annual MIP: 0.55% for a 30-year loan with LTV above 95% and a base loan amount up to $726,200, following the reduction in Mortgagee Letter 2023-05.
- Full range: annual MIP runs from 0.15% to 0.75% depending on term, loan amount, and LTV. Find your exact tier in Handbook 4000.1, Appendix 1.0.
Verified as of October 2026. The 0.55% figure applies only to the tier described; do not assume it fits a different term or loan size.
Worked Example: Total Cost of Owning a Home in Henrico County on Retirement Income
This is an illustration, not a quote. Suppose a buyer purchases a $400,000 home in Henrico County, Virginia, with 3.5% down.
- Down payment: $14,000
- Base loan: $386,000
- UFMIP at 1.75%: $6,755, financed
- Total loan amount: $392,755
For principal and interest, assume an illustrative 6.25% fixed rate on a 30-year term. Actual rates change daily and depend on your profile, so treat this as a placeholder. At that assumption, principal and interest is roughly $2,418 a month.
Monthly add-ons
- Annual MIP at 0.55%: $392,755 × 0.0055 ÷ 12, about $180 a month.
- Property tax: Henrico’s rate is $0.85 per $100 of assessed value (henrico.us, verified as of October 2026). On $400,000 that is $3,400 a year, about $283 a month.
- Homeowners insurance: an estimated $150 a month. This is a placeholder; real quotes vary widely.
The total housing payment comes to roughly $3,031 a month.
Testing it against income
Compare that to the retiree’s $2,500 qualifying distribution. The payment alone is about 121% of that income, so the distribution by itself does not carry this purchase. FHA applies a front-end ratio (housing payment to income) and a back-end ratio (housing plus all monthly debts to income). The common baselines are 31% and 43%, though automated underwriting can approve higher ratios with compensating factors such as reserves. For background on the back-end measure, see the CFPB explanation of debt-to-income ratio.
At a 43% ratio with no other debts, this payment would call for roughly $7,050 in total monthly income. If the same buyer also receives Social Security and a pension totaling $4,600, the combined $7,100 gets close. That is why the full income picture matters, and why a smaller purchase price or a larger down payment from savings often changes the outcome.
Why Duane Buziak Steers Asset-Rich Borrowers Toward FHA When It Fits
When an asset depletion mortgage is on the table, Duane Buziak compares it with FHA on a few practical points. FHA carries a 3.5% minimum down payment and government-backed mortgage insurance with published, capped premiums. Non-QM asset-based products generally ask for larger down payments and, as of October 2026, typically price above FHA, though terms vary by provider and change often. For a borrower who has documentable distributions, FHA frequently costs less up front and over time. When it does not fit, Duane Buziak says so.
Broker access
As a broker rather than a single-source provider, Duane Buziak can place an FHA file with different wholesale sources, each with its own overlays on credit score, reserves, and retirement income documentation. Access to hundreds of wholesale lenders means a file that stalls with one can sometimes fit another. His Dare to Compare pricing challenge lets you measure an offer against what you have already been quoted. And because NoTouch Credit Pull is a soft pull, you can see your options before any hard inquiry, which not every provider allows.
State and county notes
Property tax shapes the monthly payment, so local rates matter. In the Richmond metro, the rates per $100 of assessed value are:
- Henrico: $0.85
- Chesterfield: $0.89
- Hanover: $0.81
Verified as of October 2026. Stafford County’s rate is in transition, so check staffordcountyva.gov for the current figure. Duane Buziak is licensed in Florida, Georgia, Kentucky, Maryland, North Carolina, South Carolina, Tennessee, Texas, Virginia, West Virginia, and the District of Columbia. Nothing here is a promise of approval; every file is reviewed on its own documentation.
FAQ: Asset Depletion, Retirement Income, and FHA Qualification
Does FHA allow asset depletion income?
No. FHA does not convert a balance into imputed income. It counts documented, recurring distributions and other actual income.
Can I use my 401(k) balance to qualify?
Not the balance itself. Regular withdrawals can count as income if you document the amount and frequency, have unrestricted access, and the account can sustain them for three years.
How long must retirement distributions continue?
At least three years under HUD Handbook 4000.1. Confirm the current wording on HUD.gov.
Can savings count as my down payment?
Yes. Your own documented savings can fund the down payment and closing costs. Large recent deposits need a paper trail.
Are gift funds allowed?
FHA permits gifts from acceptable donors, such as family members, with a gift letter and documented transfer. Details are on FHA.gov and in Handbook 4000.1.
Do I need reserves?
FHA does not require reserves on every one-unit purchase, but they can strengthen a file, and some providers require them under their own overlays. This varies as of October 2026.
What credit score do I need?
580 for the 3.5% down payment, or 500 to 579 with 10% down. Individual providers may set higher minimums.
Can I use an FHA streamline refinance later?
If you hold an FHA loan, you may qualify for a streamline refinance, which has reduced documentation and requires a net tangible benefit. Eligibility depends on payment history and loan seasoning.
Next Step: A No-Obligation Review of Your Assets and Income
FHA counts documented, continuing retirement income, not a depletion formula. If your distributions, pension, and Social Security add up to a payment you can carry, an FHA purchase may fit. If they do not yet, a review will show what to adjust.
Ready to take the first step toward homeownership with an FHA loan tailored to your needs? Schedule your free consultation today and discover how our award-winning team can help you navigate the path to your new home with competitive rates and expert guidance. FHA Mortgages by Duane Buziak is a broker with hundreds of wholesale lenders, NoTouch Credit Pull, the Dare to Compare pricing challenge, and no-out-of-pocket closing options. Call 804-212-8663 or visit 4860 Cox Rd, Glen Allen, VA 23060.
