Can a pension loan affect my mortgage options?

[TaylorTaylor]

Hi all,

I can't seem to find an answer for this any where and hoping someone can help.

I work for the state and my pension is through the state. It is not a 401k in the traditional sense. I am able to take out pension loans where the loan payments are automatically deducted from my pay check. There is no credit check involved and it doesn't show up as a loan on my credit report. We are looking to buy a home in Summer/Fall of 2023 and we just had a huge plumbing emergency where we live that costs $10k to fix.  I want to take out a pension loan to cover the cost, but unsure if that would affect our chances for applying for a mortgage? I had checked with a mortgage company and they said they had no idea and would get back to me, but never heard back.

[ShanetheMortgageMan]

In terms of the loan you'd be taking out, since it's secured by the pension then the monthly payment will not be included in your DTI calculation.  I wouldn't be concerned.

[Revelate]

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@ShanetheMortgageMan wrote:

In terms of the loan you'd be taking out, since it's secured by the pension then the monthly payment will not be included in your DTI calculation.  I wouldn't be concerned.

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That's interesting, is that intrinsic to pensions Shane?

The easy counter-example is other mortgage payments: clearly those are secured by the other property in question, but they absolutely do count against DTI unless you can show its producing rental income?

[ShanetheMortgageMan]

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@Revelate wrote:

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@ShanetheMortgageMan wrote:

In terms of the loan you'd be taking out, since it's secured by the pension then the monthly payment will not be included in your DTI calculation.  I wouldn't be concerned.

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That's interesting, is that intrinsic to pensions Shane?

The easy counter-example is other mortgage payments: clearly those are secured by the other property in question, but they absolutely do count against DTI unless you can show its producing rental income?

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It'd apply to any loans secured by a financial asset, which typically are loans against retirement (401k, 403b, pension) but could be anything.  Loans against other assets such as a car, real estate or other collateral are still included in the DTI.

[Revelate]

Thanks Shane!