Pay off 401K loan before mortgage app?

[thankfulheart]

Still working on getting my financial house in order so I can get a REAL house...

I have a loan I had to take on my 401K last year for an emergency surgery (long story).  Should I try to have that paid off before I apply for a mortgage or will it matter?

[PixieQueen80]

I am not an expert but the only reason you would have to pay the 401k back before applying is it you want your debt to income ratio to be lower to be able to purchase a higher priced home. 

[Walt_K]

I don't think it will matter.  401K loan does not count for DTI is my understanding. 

[HoldingOntoHope]

I have no idea if my 401K loan counted toward DTI, but since the payments came out of my check the net income was lower. My LO did not tell me it was a problem so I left it alone. Never a question or letter of explanation.

To the OP, perhaps when you go to a loan officer for pre-approval and they could give you some guidance. I would keep whatever I was going to need to pay it off as part of my cash reserves. I have paid them off before ahead of the schedule and the process was quick and painless. Well, at least as painless as parting with any amount of money can be.