Use Your 401(k), IRA, or Policy Cash
Vested retirement accounts and life insurance cash value can be used for down payment, closing costs, or reserves under at least one program.
Money sitting in a 401(k), IRA, or life insurance policy can count toward down payment, closing costs, and reserves.
How much of it counts depends on your age, the account, and the program.
- Life insurance policy current cash value, or a loan against that cash value, may be used for down payment, closing costs, or reserves under at least one program.
- Vested retirement accounts such as IRA, 401(k), Keogh, and 403b count at 100% of the vested balance for reserves under at least one program.
- At least one program counts 70% of the vested balance toward down payment, closing costs, and reserve requirements.
- Under at least one program, assets are not required to be liquidated unless 100% of the asset value is required to qualify.
- One program allows a 401(k) to be used only if a distribution is not already set up.
- Face value of a life insurance policy is not allowed, and annuities of any type are not allowed under at least one program.
Life insurance cash value counts, not face value
Vested retirement balances can count toward reserves
Reserves may not require liquidating the account
Age 59 1/2 changes how much of the balance counts
A 401(k) loan payment can stay out of DTI
Recent statements must show your vested amount
What is the Saxton Retirement and Life Insurance Funds Home Loan?
A home loan that uses documented retirement and life insurance assets in place of cash in the bank.
The Saxton Retirement and Life Insurance Funds Home Loan is financing where the money you bring to closing comes out of a retirement account or a life insurance policy instead of a checking account. Under at least one program, vested retirement accounts such as IRA, 401(k), Keogh, and 403b may be used, and life insurance policy current cash value, or a loan against that cash value, may be used for down payment, closing costs, or reserves.
Most people who need this have real net worth and a thin bank balance. The rules account for that. Under at least one program, 100% of the vested balance may be considered for reserves, and assets are not required to be liquidated unless 100% of the asset value is required to qualify. When funds are used for reserves under that program, liquidation is not required at all, so the account can stay where it is.
Not every account works. Annuities of any type are not allowed under at least one program, a self-directed IRA is barred under another, and retirement accounts that are less than 100% vested are listed as ineligible for reserves. Two programs list the cash value of life insurance as an ineligible asset outright. Face value is never the number that counts. An account you cannot liquidate cannot be used to meet a reserve requirement.
Why choose the Saxton Retirement and Life Insurance Funds Home Loan?
This is for the borrower whose down payment is sitting in a 401(k), an IRA, or a life insurance policy rather than a checking account.
Your Age Changes The Math
Age 59 1/2 is the line. Under at least one program, if you are older than 59 1/2, 70% of the vested value counts after outstanding loans are deducted, and if you are 59 1/2 or younger, 60% counts. Another program counts 50% of retirement funds if you are younger than 59 1/2, or if you are older but on an employer administered plan and are not separated from service.
Cash Value, Not Face Value
Under at least one program, the cash value of a vested life insurance policy is allowed at 100%. Another requires 100% of the cash surrender value less any loans to be considered for assets. Face value is not allowed. If you only know the face amount on the policy, call the carrier and ask for the current cash value and any loan balance against it.
Reserves Without Liquidating Anything
When the money is used for reserves, at least one program counts 100% of the value of the assets and does not require liquidation. Terms of withdrawal are not required for reserves under that same program. For life insurance used as reserves, at least one program says the cash value must be documented but does not need to be liquidated or received by the borrower.
Loans Against The Account
If you have borrowed against the asset, the debt comes off the top. Under at least one program, any debt tied to an eligible asset must be netted out, and a 401(k) loan against the 401(k) account is the example given. Separately, the payment related to a 401(k) loan does not need to be included in your total debt obligation under at least one program.
Statements Have Short Shelf Lives
Balances move, so the numbers have to be fresh. Under at least one program, account statements should be updated with a transaction history dated within 30 days of the note date due to market volatility, and balances of qualifying assets must be verified within 10 days of the note date. A statement pulled early in the process often has to be pulled again.
Proof That You Can Withdraw
Access is its own requirement. Evidence of access to funds is required for employer-sponsored retirement accounts under at least one program. For down payment and closing costs, if the funds have not been liquidated, terms of withdrawal are required to confirm that you have access to withdraw them. Evidence of liquidation is required if the funds will be used to close the transaction.
Hear From Homeowners Like You
Frequently Asked Questions
Straight answers about using retirement and life insurance money to buy or refinance a home.
Under at least one program, yes. That program counts 70% of the vested balance toward down payment, closing costs, and reserve requirements. Be careful with what you read elsewhere. These rules come from non-QM, jumbo, HELOC, and closed-end second programs, not from Fannie Mae, Freddie Mac, FHA, VA, or USDA guidelines, so ask which program you are actually being reviewed under before you plan around any of it.
Not always. Under at least one program, assets are not required to be liquidated unless 100% of the asset value is required to qualify. There is a limit to that. Under at least one program, you must be able to liquidate funds used to meet the reserve requirement, and accounts that cannot be liquidated are not eligible to be used as reserves. Evidence of liquidation is required if funds will be used to close the transaction.
It varies by program, and the same account can support different amounts at two lenders. One program counts 80% of the vested balance less outstanding loans secured against it if you are under eligible retirement age, and 100% of the vested balance less those loans once you reach it. Another sets the line at 59 1/2 and counts 70% above that age and 60% at or below it.
Under at least one program, the current cash value of the policy, or a loan against that cash value, may be used for down payment, closing costs, or reserves. One program allows 100% of the value unless the account is subject to penalties. Face value is not allowed. Two other programs list the cash value of life insurance as an ineligible asset, so the answer depends on which program you are in.
Several are not. Annuities of any type are not allowed under at least one program. A self-directed IRA is barred under another. Retirement accounts that are less than 100% vested are listed as ineligible for reserves. Two programs list the cash value of life insurance under ineligible assets outright. One program allows a 401(k) only if a distribution is not already set up.
It depends on the program. One requires two complete months of financial statements. Another requires statements within 90 days of the closing date. A third requires the most recent six months of account statements for all qualified assets. Retirement account statements must be the most recent statements, and they must identify your vested amount and the terms of the account.
Often it does not. Under at least one program, loans secured by financial assets such as life insurance policies, 401(k)s, IRAs, and CDs do not require the payment to be included in DTI if you provide documentation showing the asset as collateral for the loan. Under another program, the payment related to a 401(k) loan does not need to be included in total debt obligation. The balance is still netted out of the asset itself.
Find out what you qualify for
If your down payment is sitting in a retirement account or a life insurance policy, the next step is showing what is vested, what is borrowed against it, and how quickly you can reach it. We will tell you which program treats your accounts most favorably before you move a dollar. Get a fast, no-obligation pre-qualification today.
Get Pre-Qualified*Loan amounts, rates, terms, and down payment requirements are subject to credit approval, income and asset verification, and program eligibility. Rural housing financing is governed by USDA area loan limits and income limits rather than by conforming loan limits. Down payment and cash-out limits vary by occupancy, credit score, and documentation type. Not all applicants will qualify. Saxton Mortgage, LLC is an Equal Housing Lender.