Posted on: 10th Nov, 2011 12:38 am
I want to take out a personal loan from my 401K. I know it's a bad idea. But I'd like to take out a 1,000 loan now and then take out another loan to help with a down payment on a home. Will this have a negative impact when I go for loan approval?
I don't think a 401k loan will have a negative impact when you apply for a loan and go for a loan approval. However, if your debt to income ratio is too high, then it will become difficult for you to qualify for a loan.
Almost all lenders (but, not 100%) do not count the 401k loan payments (you are paying yourself back) in the debt ratio calculation.
So, it should not hurt your debt ratios ratios
Some lenders and some mortgage products require that you have a certain amount of reserves---money left after closing that you are not spending. Money in your 401k that you can borrow against can count as reserve $. If you already borrowed, that amount can no longer be used for reserves.
So, if you need that money for reserves, you may have hurt yourself. If you do not need that money for reserves, you have not hurt anything.
So, it should not hurt your debt ratios ratios
Some lenders and some mortgage products require that you have a certain amount of reserves---money left after closing that you are not spending. Money in your 401k that you can borrow against can count as reserve $. If you already borrowed, that amount can no longer be used for reserves.
So, if you need that money for reserves, you may have hurt yourself. If you do not need that money for reserves, you have not hurt anything.
