Mdthbs

How could Nomadic scholars effectively memorize libraries worth of information

(3 of 11: Akari) What is Pyramid Cult's Favorite Car?

How can I say in Russian "I am not afraid to write anything"?

What would the United Kingdom's "optimal" Brexit deal look like?

How did the Axis intend to hold the Caucasus?

Why force the nose of 737 Max down in the first place?

How do you pronounce "Hain"?

What is more environmentally friendly? An A320 or a car?

2 weeks and a tight budget to prepare for Z-day. How long can I hunker down?

Examples of simultaneous independent breakthroughs

Why is the number of local variables used in a Java bytecode method not the most economical?

What is this 4 sharp symbol and what does it mean?

What do you call a flexible diving platform?

Why does Canada require mandatory bilingualism in a lot of federal government posts?

How long until two planets become one?

Exploiting the delay when a festival ticket is scanned

What happens when a flying sword is killed?

If Trump gets impeached, how long would Pence be president?

Wand of the War Mage spellcasting focus and bonus interaction with multiclassing

Are the named pipe created by `mknod` and the FIFO created by `mkfifo` equivalent?

Does Wolfram Mathworld make a mistake describing a discrete probability distribution with a probability density function?

What language is Raven using for her attack in the new 52?

Why did House of Representatives need to condemn Trumps Tweets?

Why did some Apollo missions carry a grenade launcher?

Does a 401(k) loan count as debt when calculating Debt-to-Income Ratio?

If I co-sign a loan, does it affect my own ability to borrow due to the debt-to-income ratio?How should I calculate the opportunity cost of using a 401(k) loan?Does settlement of second mortgage count as short sale?Rate used for approval on a 5/5 ARM?Does a 401(k) contribution harm your Debt-to-Income ratio for a mortgage application?Does Debt to Income Ratio include the loan I am applying for?Calculating tax on 401(k) to Roth IRA conversionStudent Loans and Creditworthiness401(k) loan and job transferShould I avoid reporting expenses on my tax return in order to have a higher income for getting a mortgage?

.everyoneloves__top-leaderboard:empty,.everyoneloves__mid-leaderboard:empty,.everyoneloves__bot-mid-leaderboard:empty{ margin-bottom:0;
}

2

Does a regular 401(k) loan count as debt when calculating one's Debt-to-income ratio when applying for a mortgage?

The loan is within the organization that manages the 401(k), and it does not show in any of the FICO score data.

united-states loans 401k mortgage-qualification debt-to-income-ratio

share|improve this question

edited 6 hours ago

Chris W. Rea

26.8k1515 gold badges9090 silver badges179179 bronze badges

asked 8 hours ago

KingsInnerSoulKingsInnerSoul

26433 silver badges1212 bronze badges

• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  It's a loan that you've got to pay back, so it should. But... even if it doesn't you should count it as debt -- because it's debt, and you've got to pay it back -- in your DtI calculation, no matter what the mortgage broker says. Remember: it's your life, your financial health, your marriage that's put at risk by deceiving yourself, not the mortgage broker's!
  
  – RonJohn
  8 hours ago
  

  
  
  
  


• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  @RonJohn Doesnt that mean the OP should also count the payments as income? As they are to themselves.
  
  – Vality
  8 hours ago
  

  
  
  
  


• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  @Vality #1 Is that money going to your checking account? Of course not; it's obviously not spendable money. #2 The whole notion that "you're paying yourself" is complete nonsense, since what you're really doing is saving a little extra, while losing out on the free money you'd have received from capital appreciation and dividend reinvestment in the 401(k) account.
  
  – RonJohn
  7 hours ago
  

  
  
  
  

add a comment | 

2

Does a regular 401(k) loan count as debt when calculating one's Debt-to-income ratio when applying for a mortgage?

The loan is within the organization that manages the 401(k), and it does not show in any of the FICO score data.

united-states loans 401k mortgage-qualification debt-to-income-ratio

share|improve this question

edited 6 hours ago

Chris W. Rea

26.8k1515 gold badges9090 silver badges179179 bronze badges

asked 8 hours ago

KingsInnerSoulKingsInnerSoul

26433 silver badges1212 bronze badges

• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  It's a loan that you've got to pay back, so it should. But... even if it doesn't you should count it as debt -- because it's debt, and you've got to pay it back -- in your DtI calculation, no matter what the mortgage broker says. Remember: it's your life, your financial health, your marriage that's put at risk by deceiving yourself, not the mortgage broker's!
  
  – RonJohn
  8 hours ago
  

  
  
  
  


• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  @RonJohn Doesnt that mean the OP should also count the payments as income? As they are to themselves.
  
  – Vality
  8 hours ago
  

  
  
  
  


• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  @Vality #1 Is that money going to your checking account? Of course not; it's obviously not spendable money. #2 The whole notion that "you're paying yourself" is complete nonsense, since what you're really doing is saving a little extra, while losing out on the free money you'd have received from capital appreciation and dividend reinvestment in the 401(k) account.
  
  – RonJohn
  7 hours ago
  

  
  
  
  

add a comment | 

Does a regular 401(k) loan count as debt when calculating one's Debt-to-income ratio when applying for a mortgage?

The loan is within the organization that manages the 401(k), and it does not show in any of the FICO score data.

united-states loans 401k mortgage-qualification debt-to-income-ratio

share|improve this question

edited 6 hours ago

Chris W. Rea

26.8k1515 gold badges9090 silver badges179179 bronze badges

asked 8 hours ago

KingsInnerSoulKingsInnerSoul

26433 silver badges1212 bronze badges

share|improve this question

edited 6 hours ago

Chris W. Rea

26.8k1515 gold badges9090 silver badges179179 bronze badges

asked 8 hours ago

KingsInnerSoulKingsInnerSoul

26433 silver badges1212 bronze badges

share|improve this question

edited 6 hours ago

Chris W. Rea

26.8k1515 gold badges9090 silver badges179179 bronze badges

asked 8 hours ago

KingsInnerSoulKingsInnerSoul

26433 silver badges1212 bronze badges

edited 6 hours ago

Chris W. Rea

26.8k1515 gold badges9090 silver badges179179 bronze badges

edited 6 hours ago

Chris W. Rea

26.8k1515 gold badges9090 silver badges179179 bronze badges

asked 8 hours ago

KingsInnerSoulKingsInnerSoul

26433 silver badges1212 bronze badges

asked 8 hours ago

KingsInnerSoulKingsInnerSoul

26433 silver badges1212 bronze badges

2 Answers
2

active

oldest

votes

2

It does, because it is a regular payment. If a lender is wise, they will view a 401K loan as riskier than other types of debt. An auto loan or credit card does not require a balloon payment when you change a job, but a 401K loan does. And people change jobs frequently.

share|improve this answer

answered 8 hours ago

Pete B.Pete B.

55.9k1313 gold badges121121 silver badges173173 bronze badges

• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  The consequences of defaulting on a 401(k) loan are higher for the individual and lower for the creditor though. Your credit score is not impacted by defaulting on a 401(k) loan, which shows how the financial sector doesn't truly treat 401(k) loans as a loan.
  
  – GOATNine
  6 hours ago
  

  
  
  
  

add a comment | 

2

A 401(k) loan is not considered in your DTI ratio, as your 401(k) is an asset of yours, not money on loan from another source. While incredibly unwise to take a 401(k) loan out (see second paragraph for a litany of reasons that is by no means comprehensive), It is the equivalent of "Borrowing" funds from an existing account under your control (albeit with stricter rules). 401(k) loans will, however, reduce what is considered to be your disposable income (for purposes like repaying student loans on an income based plan, and maximum mortgage size qualification).

401(k) loans are some of the singularly most expensive loans a person can take, as you lose out on not only the current interest from the account, but also potential future interest (40 years of growth compounding at an average of 7.5% post-inflation adjustment is ~$18 for every dollar loaned out). Additionally, many plans do not allow ongoing contributions with an outstanding loan (forgoing company match which is a guaranteed return of that % per dollar). In the USA, 401(k) loans must be repaid no later than 90 days from termination of employment (some plans restrict this even further, to 60 days, 30 days, or even immediately). Unexpected job loss makes this type of loan much riskier than it would seem at the outset. finally, 401(k) accounts have a maximum annual contribution limit (see IRS guidelines for the particular years limit, 2019 is $19,000 plus $10,000 catch up for those 55 years old and older) meaning that each year you do not max out, and each year that has less than optimal growth, is a year that underutilizes your 401(k) and the tax benefits it provides.

share|improve this answer

answered 7 hours ago

GOATNineGOATNine

1,52544 silver badges1717 bronze badges

• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  I don't agree with your reasoning - your house is an asset of yours as well, but mortgages certainly count as loans. Why would borrowing against your 401(k) be different?
  
  – D Stanley
  5 hours ago
  
  
  

  
  
  
  


• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  A well articulated view, but I disagree with much of the conclusion. Borrowing at 5-6%? Not too awful. Getting 5-6% on the cash portion of your retirement acct? Also not bad. The real issue, the one major problem of the 401(k) loan, is what happens if employment ends.
  
  – JoeTaxpayer♦
  5 hours ago
  

  
  
  
  

add a comment | 

2

It does, because it is a regular payment. If a lender is wise, they will view a 401K loan as riskier than other types of debt. An auto loan or credit card does not require a balloon payment when you change a job, but a 401K loan does. And people change jobs frequently.

share|improve this answer

answered 8 hours ago

Pete B.Pete B.

55.9k1313 gold badges121121 silver badges173173 bronze badges

• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  The consequences of defaulting on a 401(k) loan are higher for the individual and lower for the creditor though. Your credit score is not impacted by defaulting on a 401(k) loan, which shows how the financial sector doesn't truly treat 401(k) loans as a loan.
  
  – GOATNine
  6 hours ago
  

  
  
  
  

add a comment | 

2

It does, because it is a regular payment. If a lender is wise, they will view a 401K loan as riskier than other types of debt. An auto loan or credit card does not require a balloon payment when you change a job, but a 401K loan does. And people change jobs frequently.

share|improve this answer

answered 8 hours ago

Pete B.Pete B.

55.9k1313 gold badges121121 silver badges173173 bronze badges

• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  The consequences of defaulting on a 401(k) loan are higher for the individual and lower for the creditor though. Your credit score is not impacted by defaulting on a 401(k) loan, which shows how the financial sector doesn't truly treat 401(k) loans as a loan.
  
  – GOATNine
  6 hours ago
  

  
  
  
  

add a comment | 

It does, because it is a regular payment. If a lender is wise, they will view a 401K loan as riskier than other types of debt. An auto loan or credit card does not require a balloon payment when you change a job, but a 401K loan does. And people change jobs frequently.

share|improve this answer

answered 8 hours ago

Pete B.Pete B.

55.9k1313 gold badges121121 silver badges173173 bronze badges

share|improve this answer

answered 8 hours ago

Pete B.Pete B.

55.9k1313 gold badges121121 silver badges173173 bronze badges

answered 8 hours ago

Pete B.Pete B.

55.9k1313 gold badges121121 silver badges173173 bronze badges

answered 8 hours ago

Pete B.Pete B.

55.9k1313 gold badges121121 silver badges173173 bronze badges

2

A 401(k) loan is not considered in your DTI ratio, as your 401(k) is an asset of yours, not money on loan from another source. While incredibly unwise to take a 401(k) loan out (see second paragraph for a litany of reasons that is by no means comprehensive), It is the equivalent of "Borrowing" funds from an existing account under your control (albeit with stricter rules). 401(k) loans will, however, reduce what is considered to be your disposable income (for purposes like repaying student loans on an income based plan, and maximum mortgage size qualification).

401(k) loans are some of the singularly most expensive loans a person can take, as you lose out on not only the current interest from the account, but also potential future interest (40 years of growth compounding at an average of 7.5% post-inflation adjustment is ~$18 for every dollar loaned out). Additionally, many plans do not allow ongoing contributions with an outstanding loan (forgoing company match which is a guaranteed return of that % per dollar). In the USA, 401(k) loans must be repaid no later than 90 days from termination of employment (some plans restrict this even further, to 60 days, 30 days, or even immediately). Unexpected job loss makes this type of loan much riskier than it would seem at the outset. finally, 401(k) accounts have a maximum annual contribution limit (see IRS guidelines for the particular years limit, 2019 is $19,000 plus $10,000 catch up for those 55 years old and older) meaning that each year you do not max out, and each year that has less than optimal growth, is a year that underutilizes your 401(k) and the tax benefits it provides.

share|improve this answer

answered 7 hours ago

GOATNineGOATNine

1,52544 silver badges1717 bronze badges

• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  I don't agree with your reasoning - your house is an asset of yours as well, but mortgages certainly count as loans. Why would borrowing against your 401(k) be different?
  
  – D Stanley
  5 hours ago
  
  
  

  
  
  
  


• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  A well articulated view, but I disagree with much of the conclusion. Borrowing at 5-6%? Not too awful. Getting 5-6% on the cash portion of your retirement acct? Also not bad. The real issue, the one major problem of the 401(k) loan, is what happens if employment ends.
  
  – JoeTaxpayer♦
  5 hours ago
  

  
  
  
  

add a comment | 

2

A 401(k) loan is not considered in your DTI ratio, as your 401(k) is an asset of yours, not money on loan from another source. While incredibly unwise to take a 401(k) loan out (see second paragraph for a litany of reasons that is by no means comprehensive), It is the equivalent of "Borrowing" funds from an existing account under your control (albeit with stricter rules). 401(k) loans will, however, reduce what is considered to be your disposable income (for purposes like repaying student loans on an income based plan, and maximum mortgage size qualification).

401(k) loans are some of the singularly most expensive loans a person can take, as you lose out on not only the current interest from the account, but also potential future interest (40 years of growth compounding at an average of 7.5% post-inflation adjustment is ~$18 for every dollar loaned out). Additionally, many plans do not allow ongoing contributions with an outstanding loan (forgoing company match which is a guaranteed return of that % per dollar). In the USA, 401(k) loans must be repaid no later than 90 days from termination of employment (some plans restrict this even further, to 60 days, 30 days, or even immediately). Unexpected job loss makes this type of loan much riskier than it would seem at the outset. finally, 401(k) accounts have a maximum annual contribution limit (see IRS guidelines for the particular years limit, 2019 is $19,000 plus $10,000 catch up for those 55 years old and older) meaning that each year you do not max out, and each year that has less than optimal growth, is a year that underutilizes your 401(k) and the tax benefits it provides.

share|improve this answer

answered 7 hours ago

GOATNineGOATNine

1,52544 silver badges1717 bronze badges

• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  I don't agree with your reasoning - your house is an asset of yours as well, but mortgages certainly count as loans. Why would borrowing against your 401(k) be different?
  
  – D Stanley
  5 hours ago
  
  
  

  
  
  
  


• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  A well articulated view, but I disagree with much of the conclusion. Borrowing at 5-6%? Not too awful. Getting 5-6% on the cash portion of your retirement acct? Also not bad. The real issue, the one major problem of the 401(k) loan, is what happens if employment ends.
  
  – JoeTaxpayer♦
  5 hours ago
  

  
  
  
  

add a comment | 

A 401(k) loan is not considered in your DTI ratio, as your 401(k) is an asset of yours, not money on loan from another source. While incredibly unwise to take a 401(k) loan out (see second paragraph for a litany of reasons that is by no means comprehensive), It is the equivalent of "Borrowing" funds from an existing account under your control (albeit with stricter rules). 401(k) loans will, however, reduce what is considered to be your disposable income (for purposes like repaying student loans on an income based plan, and maximum mortgage size qualification).

401(k) loans are some of the singularly most expensive loans a person can take, as you lose out on not only the current interest from the account, but also potential future interest (40 years of growth compounding at an average of 7.5% post-inflation adjustment is ~$18 for every dollar loaned out). Additionally, many plans do not allow ongoing contributions with an outstanding loan (forgoing company match which is a guaranteed return of that % per dollar). In the USA, 401(k) loans must be repaid no later than 90 days from termination of employment (some plans restrict this even further, to 60 days, 30 days, or even immediately). Unexpected job loss makes this type of loan much riskier than it would seem at the outset. finally, 401(k) accounts have a maximum annual contribution limit (see IRS guidelines for the particular years limit, 2019 is $19,000 plus $10,000 catch up for those 55 years old and older) meaning that each year you do not max out, and each year that has less than optimal growth, is a year that underutilizes your 401(k) and the tax benefits it provides.

share|improve this answer

answered 7 hours ago

GOATNineGOATNine

1,52544 silver badges1717 bronze badges

share|improve this answer

answered 7 hours ago

GOATNineGOATNine

1,52544 silver badges1717 bronze badges

answered 7 hours ago

GOATNineGOATNine

1,52544 silver badges1717 bronze badges

answered 7 hours ago

GOATNineGOATNine

1,52544 silver badges1717 bronze badges