We recently took a big chunk from our 401k for the downpayment on a house. How long after we deposit that into savings do we have to wait until we can apply for a home loan?
How Soon After A Large Deposit Can You Apply For A Home Loan?
February 19th, 2010 by Home Loans Leave a reply »
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There are 2 approaches you can take here.
You can apply right now in which case you will be required to provide a paper trail for the deposit or you can wait for 60 days to “season” the funds. It really doesn’t matter which way go unless you have a loan from your 401K and the terms of your repayment adversely affect your debt to income ratio. Let me know if you need more info or help.
Edit to responses. It is perfectly acceptable per FHA guide lines to borrow from a retirement account for down payment and closing costs. Sourcing and seasoning funds for down payment and closing costs is necessary to determine that the borrower did not take out an additional loan without reporting the repayment terms to the lender for inclusion is the calculation of the persons debt to income ratio.
I sort of agree with Jay’s response, but I don’t think it’s totally correct. As long as you have the funds for the down payment, you can apply for the loan immediately. The “seasoning” of funds only applies to your savings account (your reserves). The purpose of seasoning is to show the lender that you have reserves/liquidity…they don’t want you spending every dollar that you have on your bills.
Did you actually withdraw money from your 401K or just take a loan on it? Either way has its own consequences. If you withdrew money, you are going to owe income tax and early withdrawal penalties on those funds. If you took a loan, that will affect how much of a mortgage you will qualify for.
You will need to disclose to your lender where the money came from, regardless of the way you obtained the money.
Good luck.
You are borrowing your down payment, which lenders don’t like to see. That 401(k) loan will detract from your approvable mortgage limit.