401k loans effecting loan closing

[Anonymous]

I am sure this has been answered numerous time but I can't seem to find the exact answer.   I have applied for a mortgage loan with my wife and we have been preapproved for the ammount we were asking.  As I was look through the things needed for closing I noticed we have to bring in our 401K statements.  I took out a loan a few months back to clear debt so my DTI ratio looks good and now I am nervous when they see the 401K loan it will hurt me in the final approval.   So I guess my question is how do I answer the question when asked? and how will it effect my chances to close?  My wife and I make good salaries and have excellent credit.  Currently we have 3200 on credit cards which 75% of that will be paid of at the end of the month and have one car payment of $400 which is paid off in May.  any guidence would be greatly appeciated.

[Anonymous]

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@Anonymous wrote:

I am sure this has been answered numerous time but I can't seem to find the exact answer.   I have applied for a mortgage loan with my wife and we have been preapproved for the ammount we were asking.  As I was look through the things needed for closing I noticed we have to bring in our 401K statements.  I took out a loan a few months back to clear debt so my DTI ratio looks good and now I am nervous when they see the 401K loan it will hurt me in the final approval.   So I guess my question is how do I answer the question when asked? and how will it effect my chances to close?  My wife and I make good salaries and have excellent credit.  Currently we have 3200 on credit cards which 75% of that will be paid of at the end of the month and have one car payment of $400 which is paid off in May.  any guidence would be greatly appeciated.

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Do they need the 401k to count as reserves? Are you using any part of your 401k for the downpayment? And a 401k loan doesn't impact your DTI, so no need to worry there.

[Anonymous]

I have a 401k through work (which the loan is through) and my wife and I have separte IRA that we contribute on our own.   I added the totals together in the loan application.  The amount in our IRA's is more than enough.  Speaking of reserves, I am doing a deal with my friend for his house and we are doing a contract for 60 days close so it gives me time to sell our house but if we don't I will still buy his.  The loan is refercing as if we will be caring two mortgages and it is asking we have 6 months in reserves. can I use my IRA which I can take money out for the reserves or do I need to have the reserves in cash?

[Anonymous]

Unless you can liquidate it all without penalty, your lender will count a portion (i.e. 60% of the total) that can be considered reserves.

[Anonymous]

Talking to my Financial planner, he said I can take out what I put in without penalty .  I will only get penalized for the dividends.  As for the 401K will they even bring it up? if so how do I answer that without it hurting me.

[Anonymous]

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@Anonymous wrote:

Talking to my Financial planner, he said I can take out what I put in without penalty .  I will only get penalized for the dividends.  As for the 401K will they even bring it up? if so I do I answer that won't hurt me.

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As long as you have enough liquid to cover any required reserves you should be fine. Did you go to Wichita State? I have a lot of friends that went there.

[Anonymous]

I did! Thanks for recognizing.  Do you have any idea on how to approch the 401K at final review?  They will also see the payments on my pay stubs.  Not sure I can hide it, but not sure how to answer so it won't hurt us.  Thanks for all your answers so far.

[Anonymous]

No problem. They shouldn't care about the 401k loan, as they are not factored into one's DTI. The reason is if you "default" on a 401k loan, you don't owe anyone - you just get taxed.

[Anonymous]

Great!! Thank You!!!!