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Can a pension loan affect my mortgage options?

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TaylorTaylor
New Contributor

Can a pension loan affect my mortgage options?

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.

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ShanetheMortgageMan
Super Contributor

Re: Can a pension loan affect my mortgage options?

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.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 2 of 5
Revelate
Moderator Emeritus

Re: Can a pension loan affect my mortgage options?


@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.


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?




        
Message 3 of 5
ShanetheMortgageMan
Super Contributor

Re: Can a pension loan affect my mortgage options?


@Revelate wrote:

@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.


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?


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.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 4 of 5
Revelate
Moderator Emeritus

Re: Can a pension loan affect my mortgage options?

Thanks Shane!




        
Message 5 of 5
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