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If i borrow from my 401 k for a down payment will it affect the mortgage loan in any way?

by ricky11williams67 from Long Beach, California. Aug 20th 2013 Reply


William J Acres (William_Acres)
#1 ranked lender in Arizona - 8,707 contributions

It will not... most lenders allow you to borrow against your 401K.. some lenders will add the monthly payment back into your debt to income ratios even though most guidelines say it's not necessary.. .. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. 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

Aug 20th 2013
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Derick Condron (rightstartoregon)
#32 ranked lender in Oregon - 598 contributions

Yes. You will need to let the loan officer know if you plan to take a 401k Loan. They will need to count the payment on the 401K loan against your debt to income ratio. They will also need to have the documentation provided on the loan and then proof the loan is deposited in your bank account

Aug 20th 2013
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I've been doing mortgages for over 12 years and the primary mortgage programs being used today (Fannie, Freddie, FHA, VA) do not count a 401k loan payment against your debt to income ratio. There are a very small number of niche lenders who will count it against you (certain portfolio lenders), and most people would not need to use those lenders.The loan against your 401k will reduce the amount of "financial reserves" that your 401k will give you to qualify with though, meaning for example, if you have a $30k vested 401k balance and are taking a 401k loan out for $10k, then that reduces the vested balance to $20k and then lenders will qualify you using 60% of the remaining vested balance towards your reserves. Typically lenders want to see that you have 2 months of the proposed mortgage payment in reserves, and in some situations less than that is acceptable (although there are situations where more months of reserves are needed, such as if you already own a home you are living in, you do not have 30% equity, and will retain it after closing). Each person's situation is different though, so it's very difficult to provide super specific information over a message board such as this.Shane Milne | Lending in all 50 states | NMLS #81195shane@thebesthomeloans | 949-273-4161 direct

Aug 20th 2013
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Adrielle Edwards (AdrielleEdwards)
#903 ranked lender in California - 96 contributions

It will not have much of an effect, if any. Borrowing against your 401K to help with a down payment is a very common practice. As the others have said, some lenders may add this payment to you DTI but most will not. The only way it would effect you very much would be is you only have a small amount of reserves from other sources and taking away from you 401K will push your reserves below two months.

Aug 20th 2013
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Edgar Aranda (earanda)
#753 ranked lender in California - 93 contributions

No, we do not consider the loan against your 401K towards your debt to income ratio. So no, it does not hurt your chances of qualifying. I'm in CA and if you have anymore questions feel free to give me a call at 858.663.0472

Aug 20th 2013
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Andrew Alfonso (CashCow)
#45 ranked lender in Florida - 271 contributions

The short answer is Yes. But not in a large way. Andrew

Aug 20th 2013
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Jericho Cherry (Jerichocherry)
#56 ranked lender in Virginia - 1,107 contributions

Most lenders do not count a loan from your 401-K as part of your debt to income ratio. What they do require is a paper trail showing that the monies was actually taken from your 401-K and deposited into your account.

Aug 20th 2013
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Dave Metsker (DaveMetsker)
#37 ranked lender in Oregon - 2,317 contributions

Feel free to use your 401k.

Aug 20th 2013
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 3,915 contributions

When buying a home, and borrowing money from your 401k, it will have no effect whatsoever. You are borrowing your own money, so we do not count that into your debt ratio. www.Minneapolis-Mortgage.net

Aug 21st 2013
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