Mortgage company asking for copy of 401-K statement?

Question

I've been approved for a loan, but the lender wants a copy of my 401-K statement. I've never had a lender ask for this before and I don't believe this is any of their business. They said they want to make sure I've created "stability".....they can see on my pay stub the amount of money that is taken our for this account. Has anyone come across this before? Can I deny them a copy? Help!!!

Answer 1

i work at a mortgage company and the only reason the lender would ask to see your 401K is if the loan officer listed that as your assets, then they need to prove the amount. there is no reason they would ask for it to prove "stability." if it is not for asset verification then i wouldn't give it to them because they do not need it.

Answer 2

While the mortgage company may require you to provide a copy of your 401(k) statement, a 401(k) account is protected from bankruptcy. So even if you were to default on your mortgage, the mortgage company or any other agency can not try to go after your 401(k) account.

You are able to in some cases take a loan from your 401(k) or a hardship withdrawal to pay for the down payment for the purchase of a primary residence.

Answer 3

Paying off a mortgage is only going to be beneficial if you invest the money you would be paying to the mortgage in an account that is going to earn a reasonable rate of return (apprx 6%+ per year on average). The reason being is because of the huge tax deduction that most people get from paying mortgage interest. And since you will be approaching some high tax brackets, you will be needing all the deduction you can get. I would suggest that you consider saving whatever money you can in a non-qualified (non-retirement) account so when you do have kids the money is easily accessable. A $100,000 will go a long way, so may be you will have the option to invest more in retirement as well as saving up. That would be my second recommendation --- start contributing to an IRA. I can't remember which year, but coming up within the next few years you will be able to convert Traditional IRA contributions to a Roth IRA without income limitations. This would be a good thing for you to check into because of the high tax bracket you will eventually be in as well as the fact that you will have a long time until retirement and will benefit from any tax deferred growth that you can. GOOD LUCK!

Answer 4

None of their business? Of course it is. I never have been able to understand why people try to hide assets from their loan officers. Assets help you get loans, as your ability to save money is a good credit sign.

Cash reserves, after closing, are vital to many programs and products available in mortgage banking. No one wants to lend to you, and have you sitting with zero money in the bank after closing. Having at least 2 months of your new mortgage payment in the bank after closing enhances your credit profile. The more the better. With 6 or 12 months reserves, you can often get exceptions to high debt-to-income ratios or credit issues, that wouldn't be available to you with no reserves.

The amount taken off your paystub doesn't really tell you anything, except that you put that much in that period, and maybe a year-to-date. It does NOT tell you the total amount, whether you've lost or gained on your investments, NOR how much of your employer match is there and is actually vested to you.

Quit being a pain in your loan officer's behind and provide what you're asked for. They are only trying to help you get the best loan you qualify for. You are NOT entitled to a loan. You are granted a loan.

And FYI, 99% of the time they can only use 70% of your vested balance as "reserves", since you'd likely lose 30% to taxes and penalties if you had to liquidate in an emergency.

Answer 5

You can deny them a copy but then they can deny you the loan. It's entirely proper for a mortgage lender to have a complete picture of your financial situation before making a final decision on your application.

Bonus: Funds in a 401k are generally considered "available" for down payment and closing costs even if you would never use them for such. This will improve the chances of a favorable decision on your mortgate application.

The last several mortgages I've had all requested copies of my retirement fund accounts. I provided them and had no trouble at all with being approved.

Answer 6

Giving your lender a copy of your 401K statement is no different than giving them a copy of your bank statement.

Investors require a "cash reserve" (emergency funds sufficient to make loan payments) of from anywhere from 2 months to 6 months worth, depending on the loan program, be documented in the file. A 401K is an excellent way of documenting this requirement as 65%-70%of those funds would be available to you in case of an emergency.

The lender may need your 401K statement to document sufficient reserves. This is not an uncommon practice.

If you do not show sufficient reserves after payment of closing costs in the bank accounts you have provided documentations for, the loan may be declined for insufficient reserves.

Your lender isn't being nosy, they are just trying to sufficiently document your loan to ensure the clearing of all closing conditions so that you can close on your loan.

Answer 7

Be realistic. You're asking someone to lend you a whole bunch of money based on your ability to repay, but you don't really want to give them an accurate picture of your ability to repay.......

There are loans where you won't be asked for much documentation at all. Stated income and "No-Doc" are the types of names for them. They're for people who, for whatever reason, either cannot or will not disclose certain things about their finances. For this privilege, you will pay a higher interest rate. The choice is yours.

The way I look at it, they've already pulled your credit. THAT tells alot about a person's personal habits. Letting them see your 401k statement should not bring up any horrible secrets...... unless you've been withdrawing it to spend on your mistress, and you fear your wife may find out. (mistress could be a woman, a fishing boat, or a gambling habit...)

Answer 8

This is to establish reserves available. The lender wants to see what is left in reserves after the transaction This is absolutely required if you are getting any decent credit programs. Nothing out of the ordinary here. This is one of the 4 basic requirements for financing.

1) Credit Score
2) Debt Ratio
3) Employment History
4) Assets

Here is some additional info. Hope this helps.

Answer 9

if you listed your 401-k on your loan application- your lender will ask for the copy of your statement. this work not against you, only in your favor. this money are calculated like your cash reserves available any time you need them.

Answer 10

I worked breifly in the mortgage business, and it is a common thing for them to ask for. Basically, getting a mortgage is laying your entire financial situation out in the open. Of course you have the option to deny it to them, but they may decide to not give you the loan.