The Double Count Problem: Why Money Used for Closing Cannot Also Be Income

You add up your accounts, divide by 84, and get a monthly income that comfortably supports the house.

Then the lender runs it and the number comes back materially lower. Nobody explains the difference, and the difference is one sentence.

The sentence

From CMG Financial's Non-QM Sharp Series guidelines (NMLS #1820, revised 09/21/2026), under the eligibility rules for asset depletion and asset qualifier, in a subsection headed Net Assets:

If the assets or a portion of the assets are being used for down payment or costs to close, those assets should be excluded from the balance before analyzing a portfolio for income qualification.

Funds for closing should be liquidated and documented according to Asset Documentation.

Money cannot do two jobs. The dollars that become your down payment stop being dollars that generate income. They are removed first, and the income calculation runs on what is left.

That is entirely logical. You spent it. What surprises people is the size of the effect, and the fact that which account you spend it from changes the answer.

Why the source account matters so much

Because the haircuts differ by account type:

• 100% checking, savings and money market
• 100% life insurance and annuity cash surrender value
• 80% stocks, bonds and mutual funds
• 70% all vested retirement assets
• 60% cryptocurrency, valued exclusively from Coinbase and dated within 30 days of the note date

Every dollar you remove from checking costs you a full dollar of qualifying assets. Every dollar you remove from a brokerage account costs you eighty cents. Every dollar from vested retirement costs you seventy cents.

So pulling closing funds from the most heavily discounted account preserves the most qualifying assets.

That is counterintuitive, because the instinct is to leave retirement alone and spend cash. On this calculation, the instinct works against you.

The arithmetic, run both ways

A borrower with $300,000 in checking, $800,000 in a brokerage account, and $600,000 in a vested IRA. They need $250,000 for down payment and closing costs.

Option A: fund the closing from checking.

• Checking: $300,000 minus $250,000 = $50,000 at 100% = $50,000
• Brokerage: $800,000 at 80% = $640,000
• Vested IRA: $600,000 at 70% = $420,000
• Qualifying assets: $1,110,000
• Divided by 84: approximately $13,214 a month

Option B: fund the closing from the brokerage account.

• Checking: $300,000 at 100% = $300,000
• Brokerage: $800,000 minus $250,000 = $550,000 at 80% = $440,000
• Vested IRA: $600,000 at 70% = $420,000
• Qualifying assets: $1,160,000
• Divided by 84: approximately $13,809 a month

Option C: fund the closing from the IRA.

• Checking: $300,000 at 100% = $300,000
• Brokerage: $800,000 at 80% = $640,000
• Vested IRA: $600,000 minus $250,000 = $350,000 at 70% = $245,000
• Qualifying assets: $1,185,000
• Divided by 84: approximately $14,107 a month

Same borrower, same house, same down payment. Nearly $900 a month of qualifying income separates the best option from the worst, purely on which account the money left from.

The obvious caveat

Option C produces the largest qualifying income and it is frequently the worst financial answer.

A withdrawal from a vested retirement account may be a taxable distribution, and depending on your age it may carry a penalty. That cost can dwarf the benefit of a slightly larger qualifying income.

So this is not advice to raid your IRA. It is advice to run the comparison with your accountant in the room, because most borrowers never learn the choice exists. Frequently the sensible answer is Option B: fund from the brokerage account, accept a capital gains event you were managing anyway, and pick up most of the benefit without a penalty.

The point is that it is a decision, made deliberately, rather than a default.

The 125% test runs on the same numbers

The asset minimums interact with this, and the two programs measure differently:

Asset depletion requires the lesser of $1 million in qualifying assets, or qualifying assets greater than or equal to 125% of the original subject loan amount.

Asset qualifier requires total post-closing assets greater than or equal to 125% of the original subject loan amount.

Note the phrase in the second one: post-closing. After the money has gone out.

So a borrower who is comfortably above the threshold before closing costs can fall below it after. Run the test on the post-closing figure at the start, not on the balance sitting in the account today.

And across both programs, a floor of $450,000 in qualifying assets, with assets seasoned 120 days unless pre-approved by the investor.

Reserves, and the good news

Here is the rule that keeps this manageable:

Reserves are not required for the asset depletion and asset qualifier programs.

On most loan products you would be removing the down payment from the portfolio and then documenting additional months of payment as reserves, held and untouched. Here you are not. The 125% asset test does that work instead.

That is a genuine structural advantage of these programs and it is rarely mentioned, because it is an absence rather than a feature.

The rest of the frame

• Maximum 85% loan-to-value, minimum 700 FICO
• Owner occupied only. Non-owner occupied and second homes are not permitted
• No cash-out, no gift funds, no business assets, no foreign assets, no non-occupant co-borrowers
• No other employment income may be used
• Not eligible on the Sharp Standard tier. You need Sharp Premium or Sharp Expanded

Do it in this order

1. Decide the purchase price and the total cash needed to close.
2. Model funding it from each account type and see what each does to qualifying assets.
3. Take the comparison to your accountant, with the tax cost of each option attached.
4. Choose the source, then liquidate and document it properly.
5. Recalculate the 125% test on the post-closing figure.
6. Then, and only then, decide how much house the number supports.

Most borrowers do these in reverse and find out in underwriting that the income they assumed does not exist.

Common questions

Can my down payment also count as income on an asset depletion loan? No. Assets used for down payment or costs to close must be excluded from the balance before the portfolio is analyzed for income qualification.

Does it matter which account I use for closing costs? Yes, considerably. Checking counts at 100%, stocks, bonds and mutual funds at 80%, and vested retirement at 70%, so withdrawing from a more heavily discounted account preserves more qualifying assets.

Should I take my down payment from my IRA? It produces the best qualifying income and frequently the worst tax outcome. Run the comparison with your accountant. Funding from a brokerage account is often the practical middle ground.

Do I need reserves on top of the down payment? No. Reserves are not required on the asset depletion and asset qualifier programs. The 125% asset requirement does that work instead.

What is the 125% requirement measured against? On asset depletion, qualifying assets of at least 125% of the original loan amount, or $1 million, whichever is less. On asset qualifier, total post-closing assets of at least 125% of the original loan amount.

Related reading

• Asset based and no-income home loans, the full index for this topic
• Asset Based Home Loan FAQ: Qualifying With Assets Instead of Income
• Retired With No Paycheck: The Three Ways a Lender Can Build You an Income
• Asset Depletion or Asset Qualifier: Two Programs, Two Completely Different Tests

Why bring this file to us

• We choose the closing account deliberately. Which account the down payment leaves from changes your qualifying income, and most files never consider it.
• We calculate the net portfolio first, then the haircuts, in that order, because the reverse produces a number that does not exist.
• We check the 125% test after closing funds come out, which is where files fail late.
• Broker model. Multiple investors rather than one bank's shelf, which is what a file like this needs when the first answer is no.
• You talk to the principal. Ricky Khamis is President of EPiQ Lending and a Certified Mortgage Planner, NMLS #173141, originating mortgages since 1999. Direct line: (480) 999-9842.

EPiQ Lending is NMLS #1936984, at 7975 N. Hayden Road, Suite A-101 in Scottsdale. Verify all of it before you trust any of it: Ricky's EPiQ Lending profile, the Scottsdale branch, and the license itself at NMLS Consumer Access. Hold every lender to that standard, including us.

Before you decide which account funds the closing, let me run it both ways. The difference is usually larger than people expect.

Program figures in this post come from the CMG Financial (NMLS #1820) guideline set named above, as published on the revision date given. CMG Financial is the parent company of EPiQ Lending. These figures describe one investor's program at one point in time. Other investors price and underwrite the same borrower differently, guidelines change without notice, and nothing here is an offer of any specific program or terms. Confirm current eligibility on your own file before you plan around any of it.

Equal Housing Opportunity. This is general information, not a commitment to lend or an offer to extend credit. Rates, terms, and program guidelines change and depend on credit approval, property appraisal, income and asset verification, and other qualifying factors. Not all applicants will qualify. Non-QM, asset-based and business purpose financing carry different pricing, terms and consumer protections than agency financing. Consult your tax advisor regarding the tax treatment of any income or distribution strategy.