Refinance Mortgage Tips Down Payment From 401k Or 403b Retirement
Annuities

Refinance Mortgage Tips Down Payment From 401k Or 403b Retirement Annuities



Refinance & Mortgage Tips: Down Payment From 401k Or 403b Retirement Annuities
If you​ are purchasing a​ home and have a​ substantial portion of​ your assets inside of​ a​ retirement account such as​ a​ 401K,​ 403B or​ other retirement product or​ annuity,​ you​ may choose the​ increasingly popular option of​ tapping those funds to​ make a​ down payment on​ your new home .​
Like any other accounts you​ may have in​ your name,​ such as​ brokerage accounts and bank checking,​ savings and money market accounts,​ most popular retirement accounts qualify as​ assets to​ be counted toward your reserves,​ a​ measure used by mortgage lenders to​ determine how many months of​ payments you​ must have in​ order to​ serve as​ a​ buffer covering payments you​ might miss if​ there were any interruption of​ your income .​
Retirement accounts such as​ 401(k) or​ 403(b) annuity accounts are generally administered or​ sponsored in​ whole or​ in​ part by your employer .​
In addition to​ serving as​ excellent documentation of​ your earnings and savings,​ your 401K or​ 403B accounts can be used in​ a​ variety of​ ways to​ help finance your new home purchase .​
Depending on​ the​ specific restrictions applied to​ your account,​ you​ may have the​ option of​ withdrawing money directly from the​ account or​ borrowing money in​ the​ form of​ a​ loan (against your own funds) which is​ repaid at​ a​ generally low rate of​ interest .​
Regardless of​ whether you​ cash money out of​ your account or​ take a​ loan against it,​ be sure to​ thoroughly document any details of​ the​ transaction,​ including any withdrawal or​ loan application paperwork,​ demand drafts,​ cashier’s checks,​ deposit tickets,​ etc .​
for the​ purpose of​ substantiating this source of​ funds to​ your lender.
Lenders do treat down payment money from retirement accounts differently from program to​ program and state to​ state,​ sometimes from case to​ case .​
In particular,​ borrowing money in​ the​ form of​ a​ loan may increase what the​ lender’s perceives as​ your monthly debt obligations,​ because even though you​ are borrowing money from your own account,​ you​ are still obligated to​ make a​ payment every month which you​ wouldn’t have to​ make otherwise,​ and lenders will often consider this to​ be detrimental to​ your qualifying DTI or​ Debt to​ Income Ratio,​ making it​ harder to​ borrow as​ much money as​ you​ may need .​
On the​ other hand,​ cashing out any type of​ retirement account will always create a​ taxable event and sometimes also a​ penalty fee,​ which generally accounts to​ more than the​ nominal interest rate common to​ the​ loan option .​
Speak with your loan officer about the​ requirements of​ your individual program and weight the​ options with him/her or​ another trusted financial professional.
You may also consider speaking to​ your employer about any down payment assistance programs which may be available to​ you​ as​ part of​ your benefits package .​
These can come in​ many forms,​ but it​ is​ important to​ clarify with your employer that any down payment assistance granted does not amount to​ a​ loan and that there is​ no expectation of​ payment .​
Why would an​ employer want to​ help you​ make a​ down payment? Call them old fashioned,​ but most companies do want their employees to​ stick with them,​ and if​ your employer helped you​ achieve ownership of​ your dream home,​ how would you​ feel about them? as​ with the​ 401K,​ 403B or​ other retirement account options,​ down payment assistance from your employer should be documented in​ detail and all copies of​ communication,​ checks,​ deposit tickets and statements of​ account,​ along with signed records stipulating that the​ funds are given freely and not to​ be repaid,​ should be kept for submission to​ your lender.




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