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Does outstanding 401k loan hurt DTI when applying for mortgage loan?

In July 2017 I took out a 401k loan to pay off credit card debt. I repay the loan twice a month, money is taken out of my paycheck. I am scheduled to pay off the loan in July 2019.Presently (March 2018), my husband and I are looking to buy a new home and will be undergoing the pre approval process. My question is will this hurt my DTI? I know folks take out 401k loans to help with a down payment, but this is not the case for me. The lender will see the loan payment on my paystubs and I'm just concerned that this may hurt our chances of getting approved. by annatwofive458 from Irving, Texas. Mar 20th 2018 Reply


Brian French (bfrench)
#11 ranked lender in Arkansas - 49 contributions

Hi Anna,The 401K loan will not impact your DTI at all. You are good to go :)

Mar 21st 2018
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 3,717 contributions

No. From the lending side, you are only borrowing your own money from yourself, so we do not count it into your debt ratio's. This is another reason why taking a little bit from your 401k to purchase a home is a popular options. For loans in MN, WI, and SD, visit me at www.MortgagesUnlimited.biz

Mar 21st 2018
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William J Acres (William_Acres)
#1 ranked lender in Arizona - 8,360 contributions

The short answer is NO.. in essence, you are borrowing from yourself, so 401K loans are not considered debt and are not calculated against your DTI.. assuming you meet all other eligibility requirements, you should be fine. I'm a preferred Lender with California and Arizona being my primary markets. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com NMLS# 226347 / RPM Mortgage NMLS 1541014 / AZMB0121893

Mar 22nd 2018
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