The Quick Read: A 401(k) counts toward an asset qualifier mortgage at 90% of its vested balance when the borrower is under age 59½, and at 100% once the borrower reaches 59½, through select programs and subject to underwriting. The asset qualifier path asks whether eligible assets cover the entire loan, with no employment or income documented. The account is counted, not cashed out, so a borrower does not have to withdraw anything to use it.
- Under 59½, a 401(k) or IRA counts at 90% on the asset qualifier path; at 59½ or older it counts at 100%.
- Brokerage, CD, money market and savings balances count at 100%, and accounts combine.
- Leverage runs up to 80% on a purchase and 75% on a refinance, on a principal residence or second home.
- Assets are documented: 60 days of seasoning and two months of statements per account.
- The asset depletion path treats the same 401(k) differently, at 70% at any age.
The program figures here do not change by state. For an Indiana borrower, the same percentages apply, and Indiana is where the loan is placed, not where the rules differ. Consumer lending through Lendmire is licensed in 16 states, and Indiana is one of them.
What Is an Asset Qualifier Mortgage?
An asset qualifier mortgage drives lender review on assets alone. Eligible assets, after the credit percentages, must equal or exceed the entire loan amount. No employment or income is documented.
That is the whole test. There is no monthly income figure and no debt-to-income ratio on this path. The question is simple: do the usable assets cover the loan?
It fits a specific reader. Think of a retiree living on a portfolio, someone who sold a business, an heir with a large inheritance, or an early-retired professional. Balances are big. Documented income is small or absent.
Lendmire is a broker. It arranges these loans through select lenders in its wholesale network. The lender sets the final underwriting, and every file is reviewed individually. This is a consumer mortgage for a principal residence or second home, not a rental-property loan.
Asset Qualifier vs. Asset Depletion: Two Different Paths
A borrower is qualified on one path at a time. Never blend the two tables.
The asset qualifier path says: assets cover the whole loan. The asset depletion path says: assets become monthly income. It adds up usable assets, divides by 60 months, and runs the result through the debt-to-income test.
The same 401(k) is treated differently on each.
| Factor | Asset Qualifier | Asset Depletion |
|---|---|---|
| What assets do | Cover the entire loan | Become monthly income |
| 401(k) under 59½ | 90% counts | 70% counts |
| 401(k) at 59½+ | 100% counts | 70% counts |
| Income documented | None | Derived from assets |
| Debt-to-income test | Not run on income | Yes, on derived income |
| Max leverage, purchase | 80% | 80% (65% on investment) |
| Loan amounts | Up to $4,000,000 | $125,000 to $3,500,000 |
For a borrower under 59½, the qualifier path is usually kinder to a 401(k). Ninety percent beats seventy. After 59½, the gap widens, because the qualifier path counts the account in full.
How Underwriting Treats a 401(k) Under 59½
The credit is 90% of the vested balance. Here is the sequence in order.
1. Confirm the path. The file is built as an asset qualifier file, so the loan amount is the target the assets must reach.
2. Pull the vested balance. Only the vested portion counts. Statements should show the vested amount, not just the total account value.
3. Apply the percentage. A 401(k) or IRA under 59½ counts at 90%. At 59½ or older, 100%.
4. Add the other assets. Brokerage accounts, certificates of deposit, money market and savings all count at 100%. Accounts combine.
5. Compare to the loan amount. Usable assets must equal or exceed the whole loan.
6. Document and season. Sixty days of seasoning and two months of statements for each qualifying account.
Here is a worked example of the math, illustrative only. Take an $800,000 loan. A borrower holds $330,000 in brokerage accounts (100% counts, so $330,000), $300,000 in a 401(k) under 59½ (90% counts, so $270,000), and $200,000 in savings (100%, so $200,000). Usable assets total $800,000. That equals the loan, so the file is reviewed on assets alone. The lender’s own calculation governs.
Notice what happened. The 401(k) delivered $270,000 of credit, not $300,000. That 10% haircut is the entire cost of being under 59½.
Why a Retirement Account Is Discounted
Lenders discount retirement money because it is harder to reach. Before 59½, a plan distribution may trigger a 10% additional tax on top of regular income tax, per the IRS 401(k) resource guide on general distribution rules. The same page says elective deferrals generally can’t be distributed until 59½, death, disability, separation from service, plan termination or hardship.
So a lender sees a balance that is real but not fully liquid. The haircut reflects that friction. It is a product design choice, not a tax bill and not a judgment about the borrower.
Counting a balance is also not withdrawing it. The account can stay invested. The lender reviews statements and a documented trail. Tax treatment varies; consult a qualified professional before moving any retirement money.
The Same 401(k) on the Depletion Path
On the asset depletion path, the 401(k) counts at 70% at any age. Age 59½ does not change the credit.
Run a worked example. A borrower holds $1,500,000 in securities (80% counts, so $1,200,000) and $300,000 in cash (100%, so $300,000). Usable assets are $1,500,000. Divided by 60 months, that is $25,000 of monthly qualifying income. That income then carries the housing payment and other debts through the debt-to-income test.
Put a 401(k) into that pile and it contributes at 70%. For a borrower under 59½, that is a worse deal than 90%. For a borrower already past 59½, the qualifier path is better still at 100%.
The depletion path has its own minimums. Qualified assets must be at least the lesser of $1,000,000 or 1.25 times the loan balance. It never goes below $250,000 liquid when depletion is the only income source. Asset-derived income may also supplement documented income, up to a 45% debt-to-income ratio, and when it does the minimum-assets rule is waived.
Credit differs too. The qualifier path publishes a 600 minimum score. The depletion path follows the lender’s matrix.
Which Funds Count and Which Don’t
Only vested, accessible funds in regulated accounts count. The ability-to-repay framework allows a lender to consider assets, including amounts vested in a retirement account, but it sets no haircut and no minimum age. Each program sets its own method. That is why treatment varies from lender to lender.
Here is how the pieces sort out.
| Asset | Qualifier path | Depletion path |
|---|---|---|
| Brokerage | 100% | Securities 80% |
| CDs, money market, savings | 100% | Cash and CDs 100% |
| 401(k) / IRA under 59½ | 90% | 70% |
| 401(k) / IRA at 59½+ | 100% | 70% |
| Real-estate equity | Not listed | 60% |
Not eligible on the depletion path: custodial accounts, deferred compensation, escrow accounts, foreign funds, cash on hand, stock options, non-vested restricted stock units, and funds from non-regulated financial companies.
Cryptocurrency, precious metals, collectibles and pledged or borrowed funds 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. They never count at a percentage.
Where the General Rule Breaks
Several edge cases change the answer. Each one is common enough to catch borrowers off guard.
An outstanding 401(k) loan. A plan loan reduces the balance the lender can count. The IRS rules on plan loans cap a loan at the lesser of 50% of the vested balance or $50,000, with limited exceptions. Borrowing against the plan shrinks the vested balance the file relies on. Do not take a plan loan right before application.
Borrowed or pledged funds. Money borrowed to make a balance look larger does not count. The same goes for pledged assets.
Job separation. Plan sponsors may require repayment of a plan loan on termination of employment. A borrower mid-job-change should expect the lender to ask what is outstanding.
Early-withdrawal exceptions. The IRS lists situations that avoid the 10% tax, including separation from service in or after the year the participant turns 55, and certain divorce-related payments. Lender haircuts generally do not model these case by case. The credit stays at 90% under 59½ regardless. A borrower who can document an exception should raise it with the lender, but should not count on a different percentage.
Roth versus traditional. Treatment can vary by account type and by lender. Do not assume a Roth gets different credit than a traditional account on this path. Confirm in the file.
A rollover. Moving a 401(k) into an IRA changes the account type. It does not change the age. Both count at 90% under 59½ on the qualifier path.
Cash to close from the plan. If the money has to leave the plan to close, the tax rules apply, including the 10% additional tax for a borrower under 59½. The lender may also want the funds to have landed in a bank account first. This is the most expensive way to use a 401(k). Where possible, cover the down payment from cash or brokerage and let the retirement balance do its work as counted assets.
Documents and Seasoning
Retirement accounts are documented, not waved through. “No income documentation” never means “no documentation.” The point is no traditional personal-income documentation, pay stubs or employment verification.
On the asset qualifier path, expect:
- Two months of statements for each qualifying account.
- 60 days of seasoning on those assets.
- Statements that show the vested balance.
- An explanation of any large deposit, with the source documented.
On the depletion path, statements must be at least 120 days old at application, plus the most recent statement within 45 days. Funds from the sale of a business, an inheritance or a legal settlement are excused from that seasoning.
Third-party records matter because the lender must rely on verified assets. The federal ability-to-repay rule text requires that assets a lender relies on be verified with reasonably reliable third-party records. A clean statement package is the whole file.
Reserves are simple on the qualifier path. None are required at or below 75% loan-to-value. Above that, the lender sets them. The depletion path publishes no reserve months.
What the Decision Looks Like in Practice
Start with the order of use. Cash and brokerage assets count at 100% on the qualifier path. Use them first. Treat the 401(k) as the supplemental piece that closes the gap.
If the usable total falls short, there are three moves. Add other assets that count. Lower the loan amount, since the test is assets against the entire loan. Or switch to the depletion path, though a 401(k) counts for less there.
Age timing is the other lever. A borrower a few months from 59½ moves from 90% to 100% credit on the same balance. On a $300,000 account that is a meaningful difference, so waiting or restructuring the timing can matter. Weigh that against the cost of waiting.
Run the file both ways before choosing. The qualifier path leans on total assets. The depletion path leans on income conversion and the debt-to-income test. A broker who sees many lenders’ guidelines can lay both versions side by side.
Leverage matters too. The qualifier path allows up to 80% on a purchase and 75% on a refinance, on a principal residence or second home. Investment property on the depletion path tops out at 65% on a purchase or rate-and-term and 60% on a cash-out. Cash-out proceeds never count as qualifying assets. Whether the qualifier path allows cash-out is set by the lender and not published.
Business-purpose rental financing is a separate product. That is DSCR, which qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Retirement balances there matter mainly for reserves and cash to close.
Key Terms Defined
Asset qualifier: A path where eligible assets must cover the entire loan, with no income documented.
Asset depletion: A path where usable assets are divided by 60 months to create monthly qualifying income.
Vested balance: The part of a retirement account the participant owns outright and can access under plan rules.
Haircut: The share of a balance a lender does not count, such as the 10% off a 401(k) under 59½.
Seasoning: The length of time funds have sat in an account before they count.
Usable assets: Balances after the credit percentages are applied.
Frequently Asked Questions
Do I have to be 59½ to use my 401(k) on this loan?
No. There is no minimum age on the asset qualifier path. A borrower under 59½ gets 90% credit on the vested balance, and one at 59½ or older gets 100%. The account must be vested and documented, subject to underwriting.
Do I have to cash out my 401(k) to close?
No. The balance is counted from statements, not withdrawn. The account can stay invested. Withdrawing for cash to close is a separate decision with its own tax cost, so talk to a qualified tax professional first.
Is there an Indiana-specific rule for 401(k) assets?
No. The percentages, seasoning and leverage figures are the same for an Indiana borrower as for a borrower in any other licensed state. Indiana is one of the 16 states where Lendmire’s consumer lending is licensed. Local prices and taxes are context, not program terms.
Does a 401(k) loan reduce what counts?
Yes, in practice. An outstanding plan loan lowers the vested balance the lender can rely on. The IRS caps plan loans at the lesser of 50% of the vested balance or $50,000, and plans are not required to offer them. Avoid new plan loans before applying.
Which path is better for a 401(k) under 59½?
It depends on the file. The qualifier path counts the account at 90%, while the depletion path counts it at 70%. If the total usable assets cover the loan, the qualifier path is usually stronger. If they do not, the depletion path may fit better, with different leverage and the debt-to-income test.
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 programs based on your statements, the property, credit profile, leverage, and your goals.
Lendmire’s asset-based mortgage in Indiana page presents the program for Indiana 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.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your home or investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. IRS 401(k) Resource Guide, General Distribution Rules
2. CFPB ATR/QM Small Entity Compliance Guide
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 to Finance an Indiana Vacation Home With an Asset Qualifier Mortgage · Pledged Asset Line vs Asset Qualifier Mortgage for an Indiana Home Purchase
Guides: Asset-Based Mortgage in Indiana
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.