The Quick Read: Usually yes, because the 401(k) counts as an asset, not as income: through select programs a large balance can cover the loan outright or convert into qualifying income, and a rental purchase can qualify primarily on the property’s rent rather than your paycheck, subject to lender guidelines. A short work runway matters less than most people fear.
- Assets cover the loan: On the asset qualifier path, eligible assets must equal or exceed the entire loan, and no employment or income is documented.
- Assets become income: On the asset depletion path, usable assets are divided by 60 months to create a monthly qualifying income.
- The 401(k) is discounted: It counts at 90% under age 59½ and 100% at 59½ or older on the qualifier path, and at 70% at any age on the depletion path.
- Rentals run on rent: A DSCR loan tests the property’s income, not your wages, so a few years left at work is not the deciding factor.
Who This Is For
You are a few years from retirement. Your 401(k) is large, your paycheck will soon shrink or stop, and you want a mortgage while you still have options.
That puts you in the cash-heavy, income-light group that asset-based lending was built for. Your balances are big. Your documented income, once wages end, will not be.
Lendmire is a mortgage broker. It arranges these loans through select lenders in its wholesale network and does not lend directly. Every figure below is a ceiling or floor from those programs, subject to underwriting. It is not an offer.
What Do Lenders Mean by Asset-Based Qualification?
Asset-based qualification is a way of approving a loan, not a separate product. The lender looks at what you own instead of what you earn. Nothing forces you to sell or withdraw anything.
Two paths exist, and you are qualified on one path at a time. Mixing them is a common source of confusion, so keep the two straight.
On the asset qualifier path, your eligible assets, after the credit percentages below, must equal or exceed the whole loan amount. Employment and income are not documented. The assets are documented, though. “No income documentation” never means “no documentation.”
On the asset depletion path, the lender takes usable assets, divides by 60 months, and treats the result as monthly income. That income must carry the housing payment and your other debts through the debt-to-income test.
| Factor | Asset qualifier | Asset depletion |
|---|---|---|
| What it tests | Assets cover whole loan | Assets become monthly income |
| Employment documented | No | No, unless supplementing wages |
| Property types | Primary, second home | Primary, second home, investment |
| Max loan | Up to $4,000,000 | $125,000 to $3,500,000 |
| 401(k) counts at | 90% under 59½; 100% at 59½+ | 70% at any age |
How Does a 401(k) Count on the Asset Qualifier Path?
On the qualifier path, a 401(k) or IRA counts at 90% of its balance if you are under 59½. It counts at 100% once you reach 59½. Brokerage accounts, certificates of deposit, money market and savings count at 100%, and accounts combine.
Here is the shape of a pre-retiree file, as an illustration only. Say you want an $800,000 loan. You hold $330,000 in brokerage accounts (counted at 100%, so $330,000). You hold $300,000 in a 401(k) while under 59½ (90%, so $270,000). You hold $200,000 in savings (100%, so $200,000). That counts $800,000 of usable assets, which matches the loan, so the file is reviewed on assets alone. The lender’s own calculation governs.
Notice what happened. The 401(k) helped, but it did not carry the file alone. Pre-retirees often have a mix of accounts, and mixing is the point.
Leverage on this path goes up to 80% loan-to-value (LTV, the loan as a share of the property’s value) on a purchase and 75% on a refinance, for a principal residence or second home. The lender sets whether cash-out is allowed on this path, so do not plan around it.
Seasoning is the waiting period an account’s money must sit before it counts. Here it is 60 days, with two months of statements for each qualifying account. The credit floor is a 600 score. No reserves are required at or below 75% LTV, and above that the lender sets them. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Move money into place early. Money that landed last month is the most common snag on these files.
How Does It Work When Assets Become Income?
The depletion path converts your accounts into a paper income stream. It is a qualifying calculation, not a withdrawal plan, and you do not have to draw the money.
Each asset type counts at a different share. Cash accounts and certificates of deposit count at 100%. Securities count at 80%, private stock at 75%, retirement accounts at 70% at any age, and real-estate equity at 60%.
Here is the sanctioned shape. Take $1,500,000 in securities (80%, so $1,200,000) plus $300,000 in cash (100%). Usable assets come to $1,500,000. Divide by 60 months and you get $25,000 of monthly qualifying income. That income then has to carry the housing payment and other debts through the debt-to-income test, which compares monthly debts to monthly income.
A 401(k) is the weaker ingredient on this path. At 70%, a $1,000,000 balance contributes $700,000 of usable assets. That is less than the same money would contribute on the qualifier path.
The other rules matter for planning:
- Minimum assets: qualified assets of at least the lesser of $1,000,000 or 1.25 times the loan balance. Never below $250,000 liquid when assets are your only income source.
- Statements: at least 120 days old at application, plus the most recent statement within 45 days.
- Credit: the lender’s score and loan-amount matrix. A first-time investor on this path needs a 700 score.
- Leverage: on a principal residence or second home, up to 80% on a purchase or rate-and-term refinance and 60% on a cash-out refinance. On an investment property, up to 65% on a purchase or rate-and-term refinance and 60% on a cash-out.
Cash-out proceeds never count as qualifying assets. Not eligible at all: deferred compensation, non-vested restricted stock units, stock options, custodial accounts, escrow accounts, foreign funds and cash on hand.
Retirement accounts are commonly counted at a reduced value in asset-based underwriting, a pattern 4homes.com’s guide to asset depletion loans for investors also describes. Programs differ widely on how much they discount, which is why comparing several lenders helps.
Why Does a Short Runway Change Less Than You Think?
On both asset paths, the lender does not test how many working years you have left. The qualifier path documents no employment at all. The depletion path builds income from the accounts.
Compare that to how owner-occupied underwriting has traditionally treated retirement income. The CFPB’s historical Appendix Q standard for income and debt says retirement income, such as 401(k) distributions, cannot be used to qualify if it will stop within the first three full years of the loan. It also requires verifying that income. That is the principle behind the old worry that a retiree’s accounts run dry.
Asset-based programs answer that worry differently. They test whether the balance is large enough, then apply discounts. The 60-month divisor is a conservative yardstick, not a promise about your spending.
There is one wage-related feature worth knowing. Asset-derived income can supplement documented income up to a 45% debt-to-income ratio. When it supplements, the minimum-assets rule is waived. That fits a pre-retiree who still earns a salary but needs a boost.
If your job ends while the file is open, tell your loan officer right away. On the qualifier path, no employment is documented. On a wage-supplemented file, the lender decides how the change affects the file.
What About Buying a Rental Instead?
If the property will be a rental, the cleaner lane is often a DSCR loan. DSCR stands for debt service coverage ratio. It compares the property’s monthly rent to the full monthly obligation: principal, interest, taxes, insurance and any association dues.
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.
The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Your wages and your 401(k) balance do not run through a debt-to-income test. Your credit is still reviewed, and lenders still look at reserves.
For a pre-retiree, the practical benefits are real. Wages can stop and the file does not change. Each additional rental does not stack onto your personal debt-to-income. Select lenders in the network also review sub-1.00 coverage, though leverage and terms adjust when coverage is thin.
Compare that with the asset depletion path for an investment property. It exists, but it caps leverage at 65% on a purchase and 60% on a cash-out, and it demands large qualified assets. For a pure rental, DSCR usually fits better. If the property is a home you will live in or a second home, the asset paths come first.
Looking at a much larger portfolio? Lendmire covers that in its piece Can a Retiree With a Large Portfolio Qualify for a Super Jumbo DSCR Loan?.
Is the 401(k) Better as Closing Cash or as Qualifying Assets?
Qualifying assets, in most cases. A 401(k) is easier to use as proof than as a bank account.
Pulling money out to close shrinks the balance the lender counts. It can also trigger taxes and penalties. Tax treatment varies; consult a qualified professional before relying on any withdrawal strategy.
Here are the access routes people ask about:
- Rule of 55. MyUbiquity explains that if you separate from service in or after the year you turn 55, you may be able to take withdrawals from that employer’s plan without the usual early-withdrawal penalty. It applies to the current employer’s plan only. Confirm the details with the plan administrator.
- A 401(k) loan. Per the IRS FAQ on retirement plan loans, plans may offer loans but do not have to. The cap is the lesser of $50,000 or the greater of $10,000 or 50% of your vested balance. Repayment is generally within 5 years, though a loan for a principal residence may run longer. IRAs cannot offer loans.
- Hardship withdrawals. These need an immediate and heavy financial need. An investment property does not fit that definition.
A 401(k) loan is borrowed money, and pledged or borrowed funds are not published as eligible assets on either path. The documented route is a seasoned cash balance in a regulated account, with the source reviewed by the lender. Cryptocurrency, precious metals and collectibles follow the same rule. They are not published as counting at a percentage.
There is another cost for pre-retirees. A plan loan has to be repaid while you may be leaving work. Ask your plan administrator what happens to an outstanding loan if you separate from service.
What Does the Payment Do to Your Retirement Runway?
Treat the mortgage as a lifestyle cost drawn from a portfolio, because that is what it becomes.
A market drop in the first few years of retirement hurts most, because you draw from a smaller balance while prices are down. Run your own scenarios before you commit. A financial planner can stress-test a drawdown far better than a lender can.
Required minimum distributions also shrink traditional balances as you age. That is the broker’s own planning view, not an independent finding. It is another reason to leave margin in the plan, not to run it to the lowest coverage figure.
A Planning Timeline: Two Years Out to the Application
The steps below are about preparation, not processing. They show what to line up before you apply.
1. Two years out: decide whether the property is a home or a rental. That choice sets the lane. Consolidate scattered accounts so statements are clean and in your name.
2. One year out: pick your path. If you want assets to cover the loan outright, total your eligible balances at the qualifier percentages. If you want income, run the 60-month calculation and the debt-to-income test.
3. A few months out: move any money that needs seasoning. The qualifier path wants 60 days. The depletion path wants statements at least 120 days old plus one within 45 days. Inheritance, sale-of-business and legal-settlement funds are excused from that seasoning.
4. At application: gather statements for every account counted, the purchase contract, and explanations for large deposits.
Key Terms Defined
Asset qualifier path: the route where eligible assets must cover the entire loan amount and no income is documented.
Asset depletion path: the route where usable assets, divided by 60 months, become monthly qualifying income.
Usable assets: your balances after each account type’s credit percentage is applied.
Seasoning: the waiting period money must sit in an account before it counts.
Vested balance: the part of a retirement account that is yours to keep, regardless of whether you leave the employer.
Debt-to-income (DTI): your monthly debts divided by your monthly income.
Who Should Not Do This
Skip the asset route if the 401(k) is most of your net worth and you would have to spend it down to carry the payment. Skip it if you would need a plan loan or hardship withdrawal to close. Skip it if your credit is thin, since the 600 floor on the qualifier path and the lender’s matrix on the depletion path still apply.
A smaller loan, a larger down payment from non-retirement savings, or a co-borrower may serve you better. Sometimes the right answer is waiting. That is an honest outcome, and a good broker will say so.
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. Its consumer mortgage lending is licensed in 16 states, so confirm your property’s state first.
Frequently Asked Questions
Do I have to be retired or 59½ to use my 401(k) as an asset?
No. On the qualifier path, a 401(k) counts at 90% under 59½ and at 100% from 59½ on. On the depletion path, retirement accounts count at 70% at any age. Age changes the discount on the qualifier path and the access rules, not eligibility.
Do I have to withdraw money from the 401(k) to qualify?
No. Qualification is a calculation on the balance. You document the account with statements. The money stays where it is, subject to the lender’s review.
Can I use a 401(k) loan for the down payment?
It is a poor fit. Borrowed funds are not published as eligible assets on either path, and plan loans generally must be repaid within 5 years, per the IRS. Use seasoned cash from a regulated account instead.
Does a rental purchase need my 401(k) at all?
Not for income. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. The 401(k) can still support credit strength and reserves.
What if I stop working after I apply?
Tell your loan officer. The qualifier path documents no employment, so the loan rests on assets. A file that uses wages in its debt-to-income test is reviewed again by the lender.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps self-employed and high-net-worth borrowers in 16 states qualify on bank statements, a profit-and-loss statement, 1099s or liquid assets instead of traditional personal-income documentation, through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and its guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. 4homes.com – Asset depletion loans for investors
2. CFPB – Appendix Q to Regulation Z
3. MyUbiquity – 401(k) hardship withdrawal rules
4. IRS – Retirement plans FAQs regarding loans
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a Virginia Retiree Get a Mortgage on Savings and Investments Alone? · Can a New Mexico Trust Beneficiary Qualify for a Mortgage on Trust Assets? · Can a Michigan Widow Qualify for a Mortgage on Life Insurance and Retirement Assets?
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
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.