401 loan - Posted by Kahuna

Posted by Dee Cee on June 16, 2002 at 22:53:06:

It is always best to disclose the truth. It probably shows on your paystub as a payroll deducted expense. Also if you say you’re not paying it and are just going to take the income tax hit, what happens when your lender asks for a copy of your tax return or have you fill out form 4506? And anyways who wants to take the penalty and pay tax on tax deffered income? That could be 30%. Yes the lender will count the monthly payment against your debt to income ratio. On $8000 it probably isn’t that much.

401 loan - Posted by Kahuna

Posted by Kahuna on June 15, 2002 at 19:42:19:

I am currently applying for a loan and intend to show my 401k account as an asset. The total amount of the account is 100000k. I have an 8000 loan from my 401k I’m repaying back to my account. Does this loan (from my own money) count against me when my account is reviewed by the loan underwriter? I know the loan doesn’t appear on my credit report, but it does appear on my statement (which I must submit with my docs) for the account. What does the underwriter consider when looking at such a loan? Does it affect me unfavorably (by increasing my debt load)?

Re: 401 loan - Posted by Bruce

Posted by Bruce on June 21, 2002 at 13:48:03:

I disagree with the follow ups. Most loans do not count a 401k payment against the borrower in qualifying. Since you are in essence paying yourself back.

Re: 401 loan - Posted by Dave FL

Posted by Dave FL on June 15, 2002 at 22:32:04:

What are the terms of the 401K loan?
Is it a required monthly or is there a deferement option? Is there a % rate and what if you do NOT pay the loan (assuming you wanted to take out some $ permanently?, isn’t it just taxed and reported with a 1099? Call you plan admin and ask these questions.

It may be to your advantage to say that you’re not “paying it back” and will accept the tax burden and penalty at the end of the year (assuming that this is permitted by the plan).