Asset Based Mortgages in Pennsylvania

How a balance becomes a monthly income

An asset based loan, also called asset depletion or asset utilization, turns what you have saved into a qualifying income using a formula. Nothing gets sold. Nothing gets withdrawn. The money stays invested exactly where it is.

The lender totals your eligible accounts, discounts the ones exposed to market risk, subtracts whatever you are using for the down payment and closing costs, and divides what remains by a set number of months. Whatever comes out the end is the income the file runs on.

The divisor is the whole ballgame

Sixty months is the common divisor. Eighty-four and one hundred and twenty both exist. No lender leads with theirs.

Watch what it does. Take $1.5 million left over after the down payment: at sixty months the file shows $25,000 of monthly income, at one hundred and twenty it shows $12,500. Nothing about the borrower changed between those two sentences, nobody sold a share, and the second lender will simply tell you that you do not qualify for the house the first one approves.

So that is the first question, before rate, before fees, before anything. What is your divisor.

What counts, and at what haircut

Seasoning matters as well. A balance that landed last week invites questions. The same balance sitting quietly for three months does not.

Pennsylvania taxes almost no retirement income, which is why these buyers keep arriving

This is the reason asset based lending comes up more often here than the state’s profile would suggest.

Pennsylvania does not tax Social Security. It does not tax qualifying pension income received after retirement, and it generally does not tax 401(k) or IRA distributions once the plan’s retirement requirements are met. The state personal income tax is a flat 3.07 percent and has been since 2004, and it does not touch the income most retirees actually live on.

So people with large balances and small reported income move here deliberately. Bucks and Chester counties, the Main Line, Lancaster’s retirement communities, the Lehigh Valley, the South Hills outside Pittsburgh and the Pocono lakes all draw them. Then they apply for a mortgage, hand over a tax return showing Social Security and a little dividend income, and a national lender declines a buyer with seven figures sitting in a brokerage account.

The money is obviously there. The lender simply has no product that can see it.

The asset based mortgage Pennsylvania retirees keep asking about

The question I get is almost always some version of the same one. I have the money, so why is this difficult.

Because the conventional system was built to measure a wage. It reads a pay stub, a W-2 and two returns, and it is genuinely good at that. Hand it a brokerage statement and it has nowhere to put the number. The people this affects in Pennsylvania cluster into a few recognizable groups, and if you are reading this page you are probably in one of them.

The seller, three to eighteen months after closing a business, whose returns describe a company that no longer exists and a sale year that looks deranged on paper. The retiree whose pension and Social Security are real but tell you almost nothing about what they can actually carry. The investor whose realized income is low by design, because realizing it would be expensive and pointless. And the person between roles, well capitalized, who is not going to accept a worse job to satisfy a definition of employment.

Four different lives, one identical problem. The capacity is obvious to anybody looking and invisible to the underwriting system.

A Bucks County worked example

A couple relocating from New Jersey, buying at $720,000 with 30 percent down.

• Brokerage of $1,480,000, counted at 75 percent
• Cash of $185,000, counted in full
• An IRA of $820,000, both past the penalty age, counted at 70 percent
• Eligible before deductions: $1,869,000
• Less down payment and closing costs of roughly $236,000
• Remaining: $1,633,000, divided by 60 months
• Qualifying income: about $27,200 a month

Their joint return showed Social Security and modest dividends. On that return alone no conventional lender in the country approves this purchase. On the formula the file is not even tight.

Note what the closing costs line had to absorb. Bucks County transfer tax runs about 2 percent combined, customarily split, so their half was roughly $7,200 on top of everything else.

Why not simply pay cash

Many of these buyers could. Some should, and when it is obvious I say so.

Three things tend to get left out of the mental version of this calculation. Selling appreciated positions to raise the purchase price concentrates a capital gains bill into one tax year, and that bill is frequently larger than several years of interest. Capital removed from the market stops working, which is a cost that does not appear on any settlement statement. And a house owned outright is the most illiquid thing you will ever hold, so retrieving that money later means qualifying for a loan at whatever age and income profile you have in ten years, which is a worse hand than the one you are holding today.

Against all of that: debt costs money, and sleeping well has a value nobody can put in a spreadsheet. Both positions are entirely defensible and I am not going to pretend otherwise.

Pennsylvania adds one more variable, and I raise it only so you know to ask about it. The state levies an inheritance tax, at 0 percent to a surviving spouse, 4.5 percent to adult children and other lineal heirs, 12 percent to siblings and 15 percent to everyone else. How a mortgage interacts with that is a genuine planning question. It is a question for your attorney and your accountant, not for your mortgage broker, and anyone in my business who answers it confidently is overstepping.

Where it sits against the alternatives

If you run an operating business with real deposits, a bank statement program usually qualifies you for more. If your income arrives on 1099 forms, a 1099 program will. If the property is a rental, a DSCR loan ignores your personal finances entirely and is almost always cheaper. Asset based lending is the answer when none of those apply, which is to say when there is no income stream left to document.

It also stacks. Several lenders will add the asset based figure to documented income, so a retiree with a pension and a portfolio can use both, and that combination regularly qualifies someone who failed on either piece alone.

What Pennsylvania adds to the file

You will probably not need a lawyer. Pennsylvania has no law requiring an attorney at a residential closing. Settlement normally runs through a title and settlement agent you choose, which is faster and cheaper than an attorney state, with the trade that nobody at the table is specifically representing you.

Budget your half of the transfer tax. One percent to the state, commonly another one percent locally, split by custom and with both parties jointly and severally liable for the whole. Philadelphia is 4.278 percent combined. For a relocating buyer this is frequently the single line nobody warned them about.

One county has a different ceiling. The 2026 conforming limit is $832,750 everywhere in Pennsylvania except Pike County, which falls in the New York metropolitan area and carries $1,209,750. If you are buying a larger lake property around Milford, that difference is worth checking before anyone assumes you need a jumbo.

What I need to run it

• Recent statements for the accounts you want counted. Summary pages are enough to start
• Your age, or simply whether you are past the retirement penalty threshold
• What you are buying, where, and what you intend to put down
• Any income you do have, since it may stack on top

I will tell you what the formula produces at the divisors my lenders actually use, which of them treats your particular mix of accounts best, and what the transfer tax does to your cash at the table. No credit pull to find out.

Meet Scott

Questions Pennsylvania buyers ask