The Quick Read: A 401(k) counts toward an asset qualifier mortgage as a documented asset, not as withdrawn cash, and under age 59½ the lender credits 90% of the balance on the qualifier path instead of 100%, so a Montana borrower can use the balance without liquidating it, subject to underwriting. Nobody has to retire, take distributions, or sell anything to make this work. Program figures below come from select lenders in Lendmire’s wholesale network.
- On the asset qualifier path, your eligible assets must cover the entire loan amount, and no employment or income is documented.
- Under 59½, a 401(k) or IRA counts at 90% on that path. At 59½ or older, it counts at 100%.
- Brokerage, certificate of deposit, money market and savings balances count at 100% and combine with the 401(k).
- The qualifier path covers principal residences and second homes. A pure rental purchase usually goes to a different product.
- The lender’s own calculation governs every figure here, and programs change.
Two Paths, and Which One Your 401(k) Sits On
Asset-based mortgages come in two forms, and a borrower is qualified on only one at a time. The asset qualifier path asks whether your eligible assets, after the credit percentages, equal or exceed the whole loan. The asset depletion path turns your usable assets into a monthly qualifying income by dividing by 60 months. That income then has to carry the housing payment and other debts through a debt-to-income test.
The 401(k) is treated differently on each path. This is where most borrowers get confused, because a single label like “asset-based loan” hides two sets of numbers.
| Factor | Asset qualifier | Asset depletion |
|---|---|---|
| Test | Assets cover the whole loan | Assets become monthly income |
| 401(k) under 59½ | 90% of balance | 70% of balance |
| 401(k) at 59½ or older | 100% of balance | 70% of balance |
| Property types | Primary home, second home | Also investment property |
| Statements | Two months, 60-day seasoning | 120 days old plus one within 45 days |
All of these are typical ranges through select programs, subject to underwriting. Never mix the two columns on one file.
How Does Underwriting Actually Treat a 401(k)?
Underwriting treats a 401(k) as a discounted asset. The lender never asks you to withdraw it. It values the balance conservatively and counts only that share toward the loan.
Here is the sequence on the qualifier path, step by step:
1. List every eligible account. Brokerage, certificates of deposit, money market and savings accounts count at 100%. Your 401(k) or IRA counts at 90% under 59½ and 100% after.
2. Apply the age test. Your age on the relevant date decides which percentage the retirement account gets.
3. Total the credited amounts. Accounts combine, so a strong brokerage balance can make up for a smaller retirement account.
4. Compare the total to the loan amount. Credited assets must equal or exceed the entire loan. Loans on this path run up to $4,000,000.
5. Check leverage and credit. The qualifier path allows up to 80% loan-to-value on a purchase and 75% on a refinance, for a principal residence or second home. The minimum credit score is 600.
6. Document it. The lender wants two months of statements for each qualifying account and 60 days of seasoning.
Reserves work simply on this path. None are required at or below 75% loan-to-value, and above that the lender sets them.
A Worked Example With Real Percentages
Consider an $800,000 loan with three accounts behind it. You hold $330,000 in brokerage accounts, which count at 100%, so $330,000 is credited. You hold $300,000 in a 401(k) while under 59½, which counts at 90%, so $270,000 is credited. You hold $200,000 in savings, which counts at 100%, so $200,000 is credited.
The total credited is $800,000, which matches the loan, so the file is reviewed on assets alone. Take away the 401(k) and the file fails. Turn 59½ and the same 401(k) counts at 100%, adding $30,000 of cushion.
The depletion path runs on different math. With $1,500,000 in securities (80% credited, so $1,200,000) plus $300,000 in cash (100%), usable assets are $1,500,000. Divide by 60 months and you get $25,000 of monthly qualifying income, which then has to carry the payment and other debts. These figures are illustrative, and the lender’s own calculation governs, including how funds for the down payment and closing costs are treated.
Why 59½ Is the Line
The discount exists because pulling money out of a 401(k) early is expensive. The IRS 401(k) resource guide on distribution rules says a distribution before 59½ may trigger a 10% additional tax. That tax sits on top of ordinary income tax, and Thomson Reuters’ 401(k) tax explainer confirms the same pairing. A lender that sees a 401(k) under 59½ prices in that exit cost by crediting less than the full balance.
That is why counting is far cheaper than cashing out. If you took the money out for a down payment, you would pay the tax. If you document the balance, you pay nothing and the lender simply credits 90%.
Tax treatment varies; consult a qualified professional before relying on any particular outcome.
Where the General Rule Breaks
The 90% and 100% figures are real, but several situations change the picture.
The depletion path ignores age. On the asset depletion path, retirement accounts count at 70% at any age. A borrower who passes 59½ gets no extra credit there, and the percentage is lower than the qualifier path’s 90%.
Not every account counts. Several asset types do not qualify on the depletion path: custodial accounts, deferred compensation, escrow accounts, foreign funds, cash on hand, stock options and non-vested restricted stock units. Generally, only the vested balance in your own name counts. A spouse’s separately titled 401(k) generally does not count unless that spouse is on the loan.
Tax exceptions are not modeled. Some people can take early distributions without the penalty, such as those who separate from service in or after the year they turn 55. Michigan State University’s tax school workbook notes that SECURE 2.0 added further exceptions. Lenders generally apply a flat percentage and do not model your personal exception, so you do not get extra credit for one.
Crypto, metals and collectibles do not count. Cryptocurrency, precious metals, collectibles, pledged or borrowed funds, and business accounts beyond your ownership share are not published as eligible on either path. The documented route is converting them to a seasoned cash balance in a regulated account, with the source reviewed by the lender. Funds from the sale of the property you are buying, or cash-out proceeds from the subject deal, never count.
Other accounts stack. Brokerage, savings and similar balances combine with the 401(k) on the qualifier path.
What Does Montana Change?
Montana does not change the program figures. The percentages, seasoning and leverage above apply the same way to a Montana property. Lendmire’s consumer mortgage lending is licensed in 16 states, and Montana is one of them. Eligibility on any file is subject to underwriting.
What differs by state is context: local prices, taxes and insurance. Those affect your budget, not the program parameters.
Property use matters more than location. A Montana primary residence or second home, such as a recreation cabin you will personally use, fits the qualifier path. A property you will rent out to tenants usually does not.
When the Property Is a Rental
A 401(k) does not become income on an investment-property purchase through the qualifier path. That path does not cover investment property at all. Investment property is available only on the asset depletion path, at up to 65% on a purchase or rate-and-term refinance and 60% on a cash-out refinance.
For a pure rental purchase, most investors move to a DSCR loan. A DSCR loan is a business-purpose investor loan that qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Lendmire’s complete DSCR loans guide covers how that works. On a DSCR file, the 401(k) is mostly a reserves question, and what a program accepts for reserves varies by lender. Lendmire’s article Can an IRA or 401(k) Satisfy Reserves on an Asset Depletion Mortgage? walks through that side.
Key Terms Defined
Asset qualifier: A path where eligible assets, after credit percentages, must cover the entire loan, and no income is documented.
Asset depletion: A path that divides usable assets by 60 months to create a monthly qualifying income, which then runs through the debt-to-income test.
Haircut: The share of an account’s balance a lender does not count, such as the 10% held back from a 401(k) under 59½ on the qualifier path.
Seasoning: The period an asset must sit in your account before it counts, so the lender knows where it came from.
Vested balance: The part of your 401(k) that is fully yours, which excludes employer money you have not yet earned.
Debt-to-income: Your monthly debts divided by your monthly qualifying income, which the depletion path’s derived income must satisfy.
Documents to Gather
Gather these before you talk with a broker, because the file runs on statements:
- Two consecutive months of statements for every qualifying account on the qualifier path, with every page included.
- On the depletion path, statements at least 120 days old plus the most recent one within 45 days.
- Statements that show your name, the account number, the statement period and the ending balance.
- The vested balance on your 401(k) statement.
- Records for any large recent deposit or transfer, since the lender reviews where funds came from.
Every asset is documented on both paths. No income documentation never means no documentation.
If the Numbers Fall Short
If your credited assets fall short of the loan, you still have options. Consider a smaller loan amount or a larger down payment. You could also add accounts that count at 100%, since they combine. Another route is moving to the depletion path, though it sets its own minimums: qualified assets of at least the lesser of $1,000,000 or 1.25 times the loan balance, and never below $250,000 liquid when assets are your only income source. If the property is a rental, a DSCR loan may fit better. Credit also matters, and the depletion path follows the lender’s matrix, with a first-time investor needing a 700 score.
Frequently Asked Questions
Do I have to be 59½ to use my 401(k) on an asset qualifier mortgage?
No. There is no age floor for counting the account. Age only changes the percentage: 90% under 59½ and 100% at 59½ or older on the qualifier path. You are not asked to withdraw funds.
Will counting my 401(k) trigger a tax bill?
Counting a balance is not a withdrawal, so documenting it does not create a taxable event. The cost shows up only if you actually take money out. The discount is the lender’s way of reflecting that cost, not a charge to you.
Can I use a 401(k) if I am still working?
Yes. The qualifier path documents no employment or income, so whether you work is not the test. What matters is whether the balance is yours, vested, documented and seasoned.
How does a 401(k) loan affect my numbers?
A borrowed amount reduces what the lender can count, and borrowed funds are not eligible. Have current statements ready showing your actual vested balance, and let the lender review any outstanding plan loan.
Does a 401(k) count as income on a DSCR loan?
No. A DSCR loan is reviewed primarily on the property’s rental income, not on your assets. On a rental file, the 401(k) is generally a reserves question, and acceptance varies by lender.
What to Do Next
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 that arranges financing through select lenders, and approval is up to the lender’s underwriting.
A Montana buyer under 59½ who holds both retirement and taxable accounts often finds that the 10% haircut on the 401(k) matters less than keeping the combined balance seasoned and documented.
Lendmire’s asset-based mortgage in Montana page presents the program for Montana borrowers.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging bank statement and other alternative-documentation mortgages — P&L-only, 1099-only and asset-based paths — through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. IRS 401(k) Resource Guide – General Distribution Rules
2. Thomson Reuters 401(k) tax FAQ
3. MSU Extension tax school workbook
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Reserves vs Qualifying Assets on an Asset Qualifier Mortgage · How to Buy Before You Sell in Indiana Using an Asset Qualifier Mortgage · Can Pledged or Margined Securities Count Toward an Asset Qualifier Mortgage?
Guides: Asset-Based Mortgage in Montana
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.