topic Re: Will a 401k loan affect mortgage approval? in Mortgage Loans

Will a 401k loan affect mortgage approval?

Anonymous — Sat, 29 Jun 2019 15:16:36 GMT

We are finally under contract for a house with a pre-qualification from NFCU. We should have enough cash for downpayment & closing but worry closing will come in extremely high. If we needed a bit of extra cash (prob less than $10k). Could we take out a 401k home loan am not impact mortgage approval?

I know the bank likes to verify where funds come from, so I wouldn’t want to pull from one of my lines of credit.

Re: Will a 401k loan affect mortgage approval?

Anonymous — Sat, 29 Jun 2019 15:45:42 GMT

In the same position and I have already done this for $12K. They don't consider it as you are borrowing from yourself. Good luck!!

Re: Will a 401k loan affect mortgage approval?

NC_Mtg_Loaner — Sun, 30 Jun 2019 15:47:37 GMT

The 401k loan is the best kept secret for "saving for a down payment" if you ask me.

I see it help lots of folks become homeowners all the time. So the answer is, YES it will affect your mortgage approval but not in a negative fashion if that's what you might be fearing.

So go for it! It's your money, use it to your advantage.

Congrats!

Re: Will a 401k loan affect mortgage approval?

iced — Sun, 30 Jun 2019 19:32:44 GMT

@NC_Mtg_Loaner wrote:
The 401k loan is the best kept secret for "saving for a down payment" if you ask me.

I see it help lots of folks become homeowners all the time. So the answer is, YES it will affect your mortgage approval but not in a negative fashion if that's what you might be fearing.

So go for it! It's your money, use it to your advantage.

Congrats!

Just remember that you're also robbing yourself of future savings when you take a 401k loan. That money won't be able to compound while it's out of your account, and if you are blocked from making contributions while you're in repayment (as some plans mandate) you're potentially costing yourself an order of magnitude more in lost opportunity gains than what you borrowed. This is particularly harmful for younger borrowers who have 30+ years of growth ahead of them for that money.

Borrowing against it should be an absolute last resort.

Re: Will a 401k loan affect mortgage approval?

Anonymous — Mon, 01 Jul 2019 17:57:27 GMT

Thanks, it would be a temporary loan & repaid within a couple months. I would think if I was short on cash, pulling from a line of credit would be a big no-no for a mortgage. Was just wondering if a 401k loan would be an acceptable option.

I don’t think the closing costs will come in as high as my lender estimated, which will mean no-loan necessary...but if they are I’ll be a little short.

Thanks for the responses.