Although interest rates are on the rise, it's still a great time to purchase a home. Speak with one of our expert loan officers today!

Can I use a 401K loan as part of my down payment? If so, will I have to factor in the payment I need to make to repay my 401k in my debt ratio?

Reading Time: < 1 minute

This is an incredibly common question, especially from first time homebuyers. Because the money needed for a down payment is not always easy to come by, lenders of all types allow borrowers to apply money from a 401K loan to their down payment and closing costs.

While taking out a loan from your 401K may seem counterintuitive, because ideally you’ll have to pay this back, most lenders will not factor this eventual payment into your debt-to-income ratio. See below:

  • Fannie Mae (Conventional): You are allowed to use a 401K loan. You do not have to factor the payment in to your debt ratio.
  • Freddie Mac (Conventional): You are allowed to use a 401K loan. You do not have to factor the payment in to your debt ratio.
  • FHA: You are allowed to use a 401K loan. You do not have to factor the payment in to your debt ratio.
  • USDA: You are allowed to use a 401K loan. You do not have to factor the payment in to your debt ratio.
  • VA: You are allowed to use a 401K loan. You do not have to factor the payment in to your debt ratio.

 

Have more questions? Download our eBook of the most popular mortgage FAQs
for more helpful information!

 

To learn more about specific mortgage requirements, be sure to speak with an experienced mortgage broker.

Didn't find what you were looking for?

Contact Us
Privacy Policy