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Will having a loan out on my 401(k) negatively affect my mortgage loan application?

I have a loan on my 401(k). How much will this damage my chances of getting a mortgage loan, and is it in my best interest to disclose this loan up front?
  • January 16 2013 - US
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Answers (4)

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The repayment of debt secured by a 401K does not have to be considered in the DTI. The 401K is an asset and repayment of that asset is making payments to yourself. The amount of the asset will be reduced by the loan amount for qualification.

If any lender or loan officer is telling you differently, find a new lender and loan officer.
  • January 16 2013
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It is difficult to say how much "damage" a 401K loan will do to your chances of getting a mortgage loan. Some lenders count the payment in the debt-to-income ratios, some do not.

It is in your best interest to disclose the loan upfront to the lender. It will save headaches down the road. The lender will know anyway because the payment will be on your paystub.
  • January 16 2013
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A loan against your 401K should not impact your ability to be approved for a mortgage refinance or purchase. Depending on the loan type, your 401K loan payment will count towards your DTI (debt to income ratio), so as long as the 401k loan payment doesn't cause your DTI to raise above maximum DTI guidelines, you'll be okay and this won't disqualify for a mortgage loan. Good luck!

  • January 16 2013
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it will not affect you.  we wont count that payment against you.
  • January 16 2013
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