The Quick Read: Under 59½, your 401(k) balance counts at 90% of its value toward the entire loan amount on the asset qualifier path, and it counts at 100% once you turn 59½, through select programs and subject to underwriting, with brokerage, savings and other accounts added on top of it. The loan is reviewed on assets alone, so no employment or income is documented. Every account is still documented with statements. The figures below are the same for a Michigan borrower as for anyone else, because program rules do not change by state.
- On the asset qualifier path, 401(k) and IRA balances count at 90% under 59½ and 100% at 59½ or older.
- On the separate asset depletion path, retirement accounts count at 70% at any age.
- Counting your 401(k) does not mean cashing it out. The balance stays invested.
- Each qualifying account needs two months of statements and 60 days of seasoning on the qualifier path.
- Investment property is only available on the depletion path, and a rental purchase more often fits a DSCR loan, where the 401(k) shows up as reserves.
What Are the Two Asset-Based Paths?
There are two ways to use assets instead of a paycheck, and a borrower is qualified on one path at a time. Mixing their numbers is a common mistake in this topic.
The asset qualifier path asks one question. After the credit percentages are applied, do your eligible assets equal or exceed the entire loan amount? If yes, the loan is reviewed on assets alone. No employment or income is documented.
The asset depletion path works differently. Usable assets are divided by 60 months to create a monthly qualifying income. That income must carry the full housing payment and your other debts through the debt-to-income test.
| Feature | Asset Qualifier | Asset Depletion |
|---|---|---|
| How assets are used | Cover the whole loan | Divided by 60 into income |
| 401(k) credit under 59½ | 90% | 70% |
| 401(k) credit at 59½+ | 100% | 70% |
| Purchase leverage, primary or second home | Up to 80% LTV | Up to 80% LTV |
| Investment property | Not offered | Up to 65% LTV purchase |
| Loan amounts | Up to $4,000,000 | $125,000 to $3,500,000 |
Both paths are consumer mortgages for principal residences and second homes. Only the depletion path reaches investment property. All figures are ceilings and floors through select programs, subject to underwriting, never offers.
Does a 401(k) Count If You’re Under 59½?
Yes, it counts, but at a discount on the qualifier path. Here is how underwriting treats it, step by step.
1. Ownership check. The account must be in the name of a borrower on the loan.
2. Vesting check. Only the vested balance counts. An employer match that is still vesting does not.
3. Loan deduction. Any outstanding 401(k) loan comes off the vested balance, because borrowed money is not an asset you own.
4. Age check. Your date of birth is compared to the 59½ line.
5. Credit percentage. Under 59½, the qualifier path counts 90% of the balance. At 59½ or older, it counts 100%.
6. Combine and compare. Your retirement credit is added to your other eligible accounts and compared to the loan amount.
Why the haircut? Retirement money is harder to reach before 59½. The IRS treats withdrawals before that age as early distributions that can carry an additional 10% tax unless an exception applies. A balance that costs more to liquidate is worth less to a lender, so the credit shrinks.
Notice what that rule does and does not do. It sets your tax cost. It does not set the lender’s percentage. The 90% figure is program policy, and it varies from one wholesale program to the next. Most programs Lendmire places files with discount retirement money in some way, but the exact treatment differs from program to program and by loan type.
That difference explains why online advice conflicts. One page says retirement money is excluded, another says it is discounted, and a third says age does not matter. They are usually describing different loans: qualifying on assets alone, converting assets to income, or counting assets as reserves.
Worked Example: Qualifying on Assets Alone
Consider a borrower under 59½ buying a principal residence with an $800,000 loan. This is illustrative arithmetic, and the lender’s own calculation governs.
- Brokerage accounts: $330,000 at 100% counts $330,000.
- 401(k): $300,000 at 90% counts $270,000.
- Savings: $200,000 at 100% counts $200,000.
That adds up to $800,000 of usable assets against an $800,000 loan, so the file is reviewed on assets alone, subject to underwriting. Take the 401(k) out and the borrower falls $270,000 short. The 401(k) is doing real work here, even at a discount.
Now picture the same borrower at 59½ or older. The 401(k) counts the full $300,000, and the total rises to $830,000. The extra $30,000 is cushion, not a different loan.
Leverage matters too. On the qualifier path, loans go up to 80% loan-to-value on a purchase and 75% on a refinance of a principal residence or second home. Reserves are not required at or below 75% loan-to-value, and above that the lender sets them.
What the Depletion Path Does With the Same 401(k)
The depletion path ignores the 59½ line, but it applies a deeper discount. Retirement accounts count at 70% at any age. Cash and certificates of deposit count at 100%, securities at 80%, private stock at 75% and real-estate equity at 60%.
Take a borrower with a $600,000 401(k) and $300,000 in cash. The 401(k) at 70% counts $420,000. The cash counts $300,000. Usable assets are $720,000, and $720,000 divided by 60 months gives $12,000 of monthly qualifying income. That income must then carry the housing payment and other debts through the debt-to-income test.
Depletion has its own guardrails, all subject to underwriting:
- Qualified assets must be at least the lesser of $1,000,000 or 1.25 times the loan balance.
- Liquid assets never drop below $250,000 when depletion is your only income source.
- Asset income can supplement documented income up to a 45% debt-to-income ratio. When it does, the minimum-assets rule is waived.
- Credit follows the lender’s matrix, and a first-time investor needs a 700 score.
On this path, loans run $125,000 to $3,500,000. Leverage on a principal residence or second home reaches 80% on a purchase or rate-and-term refinance and 60% on a cash-out refinance. Cash-out proceeds never count as qualifying assets.
Which is better under 59½? If your assets are large relative to the loan, the qualifier path gives the 401(k) a better credit, at 90% versus 70%. If your assets are smaller than the loan but you want income credit, depletion is often a strong option. For investment property, depletion is the only asset-based route.
Where the General Rule Breaks
The 90% rule is clean on paper. Real files have wrinkles. These are the edge cases that move the numbers.
Age-55 separation. The IRS exceptions list includes leaving an employer in or after the year you turn 55, for employer plans. Most underwriting keys off the 59½ birthday instead and does not model that exception. If you separated from service at 55, treat any different credit as a lender decision, not an automatic one.
Substantially equal periodic payments. This is a schedule of regular withdrawals that avoids the early-distribution charge. Few asset-based programs underwrite it, so do not plan around it.
Governmental 457(b) plans. The University of Michigan’s HR office states that its 457(b) plan’s contributions and earnings are not subject to the 10% penalty, while its 403(b) is. That shows why plan type matters. A 457(b) is a form of deferred compensation plan, and on the depletion path deferred compensation is not eligible, so ask early whether a 457(b) balance counts at all.
Roth accounts. Contributions can come out at any time, while earnings before 59½ face tax and penalty. How much credit a Roth earns is lender-specific.
Vesting and third-party control. Unvested funds and balances controlled by someone else do not count.
A spouse’s account. It does not count unless your spouse is a borrower on the loan.
A 401(k) loan. It reduces the vested balance, so a borrower who has taken one should expect a smaller credit.
A market drop. Stocks inside your 401(k) can fall between application and funding. A lower statement balance means a lower credit, so a file built on thin margins is exposed.
Counting Is Not Cashing Out
Counting your 401(k) does not trigger a withdrawal. The lender reviews statements, not a liquidation. Actually withdrawing the money to fund a down payment is a different event, and that one carries the tax cost.
Tax treatment varies; consult a qualified professional before relying on any retirement withdrawal.
What Doesn’t Count, and What Documents You Need
Several asset types do not count on either path. Cryptocurrency, precious metals, collectibles, business accounts beyond your ownership share, and pledged or borrowed funds are not published as eligible. The documented route is to convert them to a seasoned cash balance in a regulated account, with the lender reviewing the source.
On the depletion path, the following are also not eligible, as listed below:
- custodial accounts
- deferred compensation
- escrow accounts
- foreign funds
- cash on hand
- stock options
- non-vested restricted stock units
- funds from non-regulated financial companies
Paperwork follows the same logic. Federal lending rules require a consumer lender to verify the assets it relies on with third-party records, which is why statements are not optional.
- Qualifier path: two months of statements for each qualifying account and 60 days of seasoning. Credit starts at a 600 score.
- Depletion path: statements at least 120 days old at application, plus the most recent one within 45 days. Sale-of-business, inheritance and legal-settlement funds are excused from that seasoning.
- Both paths: ownership that matches the borrower, plan statements showing the vested balance, and proof of your date of birth for the 59½ test.
What About Rental Property?
A rental purchase usually belongs on a different loan. DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Your 401(k) does not become income there. It appears as post-closing reserves, often at a discount, and the vesting, ownership and statement checks above still apply.
How the Decision Looks in Practice
Match the path to what you are buying and what you hold.
- Primary or second home, assets larger than the loan: the qualifier path usually gives the 401(k) its best credit.
- Primary or second home, assets smaller than the loan: the depletion path converts assets to income, with retirement at 70%.
- Investment property, no documented income: the depletion path at 65% or 60% leverage, or a DSCR loan if the rent covers the payment.
- Documented income is strong: a standard income-documented mortgage may be simpler and cheaper, and you leave retirement money untouched.
If your 401(k) is the gap between qualifying and not, ask the lender early which accounts count and at what credit. Running the numbers at the discounted balance, not the statement balance, avoids surprises late in the file.
Key Terms Defined
Asset qualifier: a path where eligible assets, after credit percentages, must equal or exceed the whole loan.
Asset depletion: a path that divides usable assets by 60 months to create qualifying monthly income.
Haircut: the share of a balance a lender does not count, such as the 10% off a 401(k) under 59½ on the qualifier path.
Vested balance: the portion of a retirement account you own outright, excluding unvested employer money.
Seasoning: how long funds must sit in your account before a lender counts them.
Reserves: liquid assets left after closing, which a DSCR loan may require.
Frequently Asked Questions
Do I have to be 59½ for a 401(k) to count?
No. On the qualifier path, a 401(k) under 59½ counts at 90%, and at 59½ or older it counts at 100%. On the depletion path, retirement accounts count at 70% at any age. Programs vary, and every file is underwritten individually.
Will I have to cash out my 401(k) to close?
Not to have it counted. The lender reviews statements and the balance stays invested. Cashing out to fund a down payment is a separate choice with its own tax cost.
Does a 401(k) loan hurt my qualifying?
Usually, yes. An outstanding 401(k) loan is deducted from the vested balance, so the credit is smaller. Borrowed or pledged funds are not published as eligible on either path.
Does a Roth account count?
It may, but treatment is lender-specific. Roth earnings before 59½ face tax and penalty, so expect the credit to be reviewed closely.
Can my spouse’s 401(k) count?
Only if your spouse is a borrower on the loan. An account that belongs to a non-borrowing spouse does not count.
Next Steps
If you are qualifying on assets rather than income and want to see how the numbers work, Lendmire can help you compare asset-based mortgage options based on your statements, the property, credit profile, leverage, and your goals. Lendmire is a broker, and its consumer mortgage business is licensed in 16 states, including Michigan. Programs are placed through select lenders in its wholesale network. This is not a commitment to lend.
Lendmire’s asset-based mortgage in Michigan page presents the program for Michigan borrowers.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. IRS – Exceptions to tax on early distributions
2. University of Michigan HR – early withdrawals
3. Cornell LII – 12 CFR 1026.43
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Buy Before You Sell in Virginia Using an Asset Qualifier Mortgage · How a 401(k) Counts Toward a Florida Asset Qualifier Mortgage Under Age 59½ · How Many Accounts Can You Combine on an Asset Qualifier Mortgage?
Guides: Asset-Based Mortgage in Michigan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.