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elspouse

Funding A House Down Payment With A Loan

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My 457 permits 15-year loans to buy a house.

 

I know all about the potential downsides but due to a temporary cash crunch it might make sense for me to borrow from the 457 if I can use it towards the down payment.

 

 

Thus, what I am more concerned about is how mortgage lenders treat a loan from a 457 (or other plan).

 

From some preliminary research it seems most lenders WILL count the loan payments in calculating my debt-to-income ratio.

 

What I have not been able to get an answer to, however, is whether for purposes of meeting the

5%-20% down payment requirement, the loan proceeds are considered my own money, i.e. the mortgage lender will let me use them to meet the required down payment, or is it treated like a loan from a third party and thus not viewed as part of the down payment?

 

Thanks for any info!

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"for purposes of meeting the 5%-20% down payment requirement, the loan proceeds are considered my own money, ..., or is it treated like a loan from a third party and thus not viewed as part of the down payment?"

 

I really do not know, but your lender should be able to help you with that question. I would start there.

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I really do not know, but your lender should be able to help you with that question. I would start there.

 

I should have clarified - I won't be buying for almost a year, so I don't have a particular lender to query - I was wondering if there's a general trend in the industry to aid in my planning.

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Okay. Then I can only speak from personal experience then on this one. The loan I had from a plan years and years ago certainly did count as a personal debt on my items listed as "outstanding existing debt", and the payment was listed as part of my monthly costs (since it showed up as a deduction from my paycheck). Thus it did count in my total debt payments vs income calculation.

 

The fact that you take the loan now and then store the proceeds away somewhere for the time being and use what's left for downpayment purposes shouldn't factor into their calculations if they are already counting the debt and payments in their debt/income ratios to begin with. Instead, my guess is that it would be considered as coming from your own money.

 

For what it's worth (FWIW) - but don't take this as a loan expert's response, that's not me!

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