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Down payment

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Sbrooks1
Valued Contributor

Down payment

I plan on borrowing 401 for down, should I get this done and settled prior to app
Message 1 of 8
7 REPLIES 7
Anonymous
Not applicable

Re: Down payment

Hi,

Me and my husband are doing the same thing. You don't have to start that until you are under contract of your home. Either way your LO will ask for sources of your downpayment and you will have to provide the statement from your 401k.

Message 2 of 8
youdontkillmoney
Valued Contributor

Re: Down payment

1st:

Start looking into your 401k plan provisions for allowing this and take a look at the application for a head's up what you need to do

 

2nd:

Yes do let your lender know, but also how it typically works I've read is that you wait until you are under contract for a home (i.e. you and seller agree on a price and terms and everyone signs), then at this time you initiate the 401k loan.

Message 3 of 8
Sbrooks1
Valued Contributor

Re: Down payment

Have contacted my plan admin and can borrow 50%of vested , which should be about 18 grand , I have a current loan already to pay down IRS and the plan allows for two loans at a time!
Message 4 of 8
youdontkillmoney
Valued Contributor

Re: Down payment

I would advise to botrrow a 2nd loan if that is your plan when you are under a home contract so as to not pay interest right away; your lender will likely advise the same

 

If your question is if you should pay off the current loan first, you may want to since the lender may take your current payments (shown on your pay stub) as part of DTI.

Message 5 of 8
Sbrooks1
Valued Contributor

Re: Down payment

Does anyone know if this will be counted in DTI or is it lender based. I may never qualify if so
Message 6 of 8
Anonymous
Not applicable

Re: Down payment

My understanding is that the 401k "loan" is secured by the funds left in the account. These funds left in your account are therefore not available to be counted as reserves or otherwise available as assets. Since the "loan" is really your own money, if you fail to repay it no one is going to sue you for it and therefore are NOT counted towards your DTI.

Message 7 of 8
Anonymous
Not applicable

Re: Down payment

It will not count against your DTI.

Message 8 of 8
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