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Qualify Mortgage if Withdraw Funds Retirement Account?

Does it affect your ability to qualify for a mortgage if you withdraw money from a retirement account? I am going to use funds from my retirement account to pay a large bill and want to understand if this will hurt me when I apply for a mortgage.

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

Unless you are using funds from a retirement account as: 1) a source of income, 2) to pay for your down payment; or, 3) to meet the reserve requirement for the mortgage, then drawing funds from a retirement account such as an IRA or 401(k) to pay a bill or for another purpose should not impact your ability to qualify for a mortgage. In fact, if you are not drawing a monthly income from the account or using it for a down payment, lenders usually discount or ignore retirement accounts because the funds may not be immediately available to you and you may incur a penalty if you withdraw the funds. Retirement accounts may be helpful if you are on the borderline in terms of meeting a potential reserve requirement but this is relatively uncommon and not all mortgages have reserve requirements.

If you are using your retirement account for any of the reasons outlined above, we recommend that you wait until after your mortgage closes before you make a significant withdrawal.  In this scenario, taking money out of your account may negatively impact your loan application, especially if you rely on the account for income.

So while the answer to your question depends on your specific circumstance, in most cases taking money out of a retirement account should have minimal impact on your ability to get approved for a mortgage. 

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About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR. More about Harry

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