The Quick Read: A 401(k) counts toward a California asset qualifier mortgage as an eligible asset at 90% of its balance when you are under 59½ and at 100% once you reach that age, with nothing sold and no withdrawal required, so long as your combined eligible assets cover the entire loan amount, subject to underwriting. The same program figures apply to a California borrower as to anyone else. The discount is a program choice, and it is smaller than most people expect.
- On the asset qualifier path, your 401(k) counts at 90% under 59½ and 100% at 59½ or older, through select programs.
- Brokerage accounts, CDs, money market and savings count at 100% on that same path, and the accounts combine.
- You do not cash out the 401(k). The balance is documented, not sold.
- The asset depletion path is different. It counts retirement accounts at 70% at any age, so turning 59½ changes nothing there.
- Every figure here is a ceiling or floor, not an offer. Each file is underwritten individually.
Two Paths, and You Are on Only One of Them
The word “qualifier” matters here. Lendmire arranges two asset-based paths through select lenders in its wholesale network, and a borrower is qualified on one path at a time.
The asset qualifier path covers the whole loan with assets. Your eligible assets, after the credit percentages below, must equal or exceed the entire loan amount. No employment or income is documented. On a principal residence or second home, it allows up to 80% loan-to-value on a purchase and 75% on a refinance, with loans up to $4,000,000.
The asset depletion path turns assets into income. Usable assets are divided by 60 months to produce a monthly qualifying income. That income then has to carry the full housing payment and your other debts through the debt-to-income test. Loans run from $125,000 to $3,500,000.
Which one fits depends on what you have. If your balances are large enough to cover the loan outright, the qualifier path is usually cleaner, because there is no income test at all. If your assets are big but not loan-sized, the depletion path can make them work as income.
Both paths document the assets. Skipping income documentation never means skipping documentation. You will hand over statements for every account that counts, and the qualifier path involves no traditional personal-income documentation, pay stubs or employment verification.
Key Terms Defined
Asset qualifier mortgage: a home loan where eligible assets alone must cover the full loan amount, with no income documented.
Asset depletion: a way of converting a pile of assets into monthly income by spreading usable assets over a set number of months, which is 60 on this program.
Credit percentage (haircut): the share of an account’s balance that the lender counts. A 90% credit means a $100,000 balance counts as $90,000.
Seasoning: how long money has sat in your accounts before the lender will count it.
Debt-to-income (DTI): your monthly debts divided by your monthly income. On the depletion path, the income is the derived figure.
Early distribution: money taken out of a qualified retirement plan before age 59½.
Why 59½ Is the Dividing Line
The age line comes from federal tax law, not from mortgage law. IRS Topic 558 describes a 10% additional tax on early distributions, meaning amounts received from a qualified plan, such as a 401(k), before age 59½. That tax applies to the portion of the distribution that counts as taxable income.
Withdrawals also trigger withholding. NerdWallet notes that the IRS generally requires automatic withholding of 20% on an early 401(k) withdrawal. Ordinary income tax comes on top of the 10%.
So a lender looking at your 401(k) sees money that would shrink if you had to spend it. The 90% credit under 59½ is a modest allowance for that drag. It is a lender’s underwriting choice, not a rule that regulators impose. Across the programs we see, the size of the discount varies a great deal, and many lenders discount a younger borrower’s retirement money far more heavily than this network’s qualifier path does.
Tax treatment varies; consult a qualified tax professional before relying on any of this for your own situation.
How Underwriting Counts Your 401(k), Step by Step
Here is how a typical file moves on the qualifier path.
1. Pick the path. If your eligible assets can cover the whole loan, the qualifier path applies. If not, the depletion path may fit.
2. List every account. Brokerage, CDs, money market, savings and your 401(k) all go on the list. They combine.
3. Apply the credit percentage. Brokerage, CDs, money market and savings count at 100%. Your 401(k) counts at 90% under 59½ and 100% at 59½ or older.
4. Take out money you are spending. Cash headed to the down payment and closing costs leaves the pile. Count what remains.
5. Compare to the loan amount. If the counted total equals or exceeds the loan, the asset test is met.
6. Check seasoning. The qualifier path wants 60 days of seasoning and two months of statements for each qualifying account.
7. Check credit and leverage. The published credit floor is 600 on this path, and leverage tops out at 80% on a purchase or 75% on a refinance of a principal residence or second home.
Underwriters also look at ownership and access. The 401(k) must be in your own name and vested. The plan has to let you reach the money. Elective deferrals generally can’t be distributed before 59½ except under hardship or other triggering events, per the IRS. That is why lenders ask for proof of vesting and plan terms.
Reserves are simple on this path. None are required at or below 75% loan-to-value. Above that, the lender sets them. If you want to know whether retirement dollars can also serve as reserves, Lendmire’s piece Can an IRA or 401(k) Satisfy Reserves on an Asset Depletion Mortgage? walks through that question.
The Same Borrower at 55 and at 60
Run the numbers on a borrower seeking an $800,000 loan on a primary residence. She holds $330,000 in brokerage accounts, $300,000 in a 401(k) and $200,000 in savings. This is an illustration, and the lender’s own calculation governs.
| Account | Balance | Credit at 55 | Counted at 55 | Counted at 60 |
|---|---|---|---|---|
| Brokerage | $330,000 | 100% | $330,000 | $330,000 |
| 401(k) | $300,000 | 90% | $270,000 | $300,000 |
| Savings | $200,000 | 100% | $200,000 | $200,000 |
| Total | $830,000 | $800,000 | $830,000 |
At 55, the counted total is $800,000, which equals the loan. She is reviewed on assets alone, subject to underwriting. At 60, the same accounts count $830,000. The extra cushion could matter if the down payment pulls cash out of the pile.
Now notice how close the 55-year-old came to the line. Had she needed $20,000 more loan, the 90% credit would have mattered. The age discount rarely sinks a file. It trims the margin.
Suppose she were short, with the same accounts but a larger loan. She would look at the depletion path instead. That path counts her 401(k) at 70% at any age, and the other accounts at their own percentages: cash and CDs at 100%, securities at 80%. A sanctioned illustration: $1,500,000 in securities (80% = $1,200,000) plus $300,000 in cash (100%) is $1,500,000 usable. Divided by 60 months, that is $25,000 of monthly qualifying income, which then carries the housing payment and other debts through the debt-to-income test.
What Reduces or Removes 401(k) Value
The percentage is only the start. Several things can shrink a 401(k)’s counted value, and they show up most often in the underwriting review.
Outstanding 401(k) loans. Underwriters usually count the balance net of any loan. Borrowing against the account also creates a debt obligation. Pay it down before you apply if you can.
Hardship withdrawals. A plan may allow them before 59½, per an IRS handout on hardship distributions. But money you have already taken out is no longer a retirement balance.
Funds used for the down payment. If the 401(k) is the source of your down payment or closing costs, that money has to be withdrawn. The tax cost described above applies, and those dollars leave the counted pile.
Non-vested balances. Employer match you haven’t vested in is not yours yet. Expect it to be excluded.
Ineligible accounts on the depletion path. Deferred compensation, stock options and non-vested restricted stock units are not eligible there. Cryptocurrency, precious metals and collectibles 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.
Edge Cases Where the General Rule Bends
Penalty exceptions. The IRS lists exceptions to the 10% tax, such as a series of substantially equal periodic payments. These exceptions are about taxes on taking a distribution. This network’s qualifier path keys its 90% credit off age. Whether a lender will treat a documented exception differently is a question to raise early. Do not assume it will.
Roth 401(k). Roth distributions are generally split between contributions and earnings, and the earnings portion can carry tax and the early-distribution charge. Many programs treat Roth and traditional 401(k) balances alike. Ask which way your file will go.
Section 457 plans. The IRS says a governmental 457 plan generally is not a qualified plan for the 10% tax. A program may still discount it, so confirm before you count on it.
Mixed-age co-borrowers. Treatment depends on whose account it is and how a lender tests age. Programs differ. Put the question to the lender with both birthdates in hand.
Spouse’s accounts. The accounts have to be the borrower’s own, or jointly owned in a way the lender accepts. A spouse who is not on the loan usually can’t contribute an account without added steps.
Real-estate equity. It counts on the depletion path at 60%, but not on the qualifier path. Cash-out proceeds from the new loan never count as qualifying assets.
Do You Have to Liquidate?
No. Assets are counted, not sold or pledged. The qualifier path counts a 401(k) in place. You keep the account, its growth and its tax deferral.
The one exception is the one already covered: money withdrawn for the down payment. If you are weighing that choice, Lendmire’s article Do You Have to Liquidate Assets to Reserve an Asset Qualifier Mortgage? goes through what stays put and what moves.
Documentation Checklist
The assets are documented on both paths. Expect to provide the following:
- Two months of statements for each qualifying account on the qualifier path, with 60 days of seasoning.
- On the depletion path, statements at least 120 days old at application plus the most recent statement within 45 days. Sale-of-business, inheritance and legal-settlement funds are excused from that seasoning.
- Proof of vesting and plan terms showing you can access the money.
- Sources for any large recent deposits or transfers.
- Confirmation of your age, since the retirement credit depends on it.
- Credit with a 600 minimum score on the qualifier path. The depletion path follows the lender’s matrix, and a first-time investor there needs a 700.
Housing history is 0x30x12, though one 30-day late in the last twelve months is considered case by case. Multiple bankruptcies are not eligible. None of this is a promise of approval.
What About Rental Properties?
The asset qualifier path is a consumer mortgage for a principal residence or second home. Investment property is available only on the depletion path, at up to 65% on a purchase or rate-and-term refinance and 60% on a cash-out refinance, subject to underwriting.
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. Qualification on a DSCR loan runs primarily on property-level rental income covering the payment, subject to lender guidelines. The complete DSCR loans guide covers that path in full.
For a pure rental purchase, DSCR is usually the better fit, and a 401(k) does not need to count at all. Asset qualification makes more sense when the property’s rent can’t carry the loan, or when you are buying a home you will live in.
Choosing Your Route Under 59½
| Option | What it does | Main tradeoff |
|---|---|---|
| Asset qualifier path | Counts 401(k) at 90% | Assets must cover the whole loan |
| Asset depletion path | Counts 401(k) at 70% | Income runs through DTI |
| Wait until 59½ | 401(k) counts at 100% on the qualifier path | You delay the purchase |
| Withdraw or borrow from 401(k) | Creates cash for down payment | Taxes, withholding and a shrinking balance |
| DSCR loan | Rent drives lender review | Rental property only |
The question that swings the outcome is rarely your credit score. It is which path you are on and which percentages apply. Ask for both before you shop.
Lenders still review your ability to repay on an assets-only loan. The federal ability-to-repay rule requires a reasonable, good-faith determination that you can repay. Trade-press analysis in the Consumer Financial Services Review notes that a lender may rely on assets, income or both. This is why statements and sourcing get scrutiny.
Where Borrowers Go Wrong
Most mistakes come from assuming a single rule applies everywhere.
- Mixing the two paths. The 90% credit belongs to the qualifier path, and the 70% credit belongs to the depletion path. Never blend them.
- Treating the credit percentage as the whole story. Vesting, loans against the account and withdrawn down payment funds move the number more.
- Assuming California adds a rule. Nothing California-specific changes how a 401(k) is counted. The tax law and the program figures are the same in every state.
- Overlooking seasoning. Money that moved recently may not count yet.
Frequently Asked Questions
Does my 401(k) count if I am still working?
Yes, subject to underwriting. On the qualifier path, no income or employment is documented, so working or not working does not change how the account counts. On the depletion path, derived income can supplement documented income up to a 45% debt-to-income ratio, and the minimum-assets rule is waived when it does.
Will I pay the 10% penalty if my 401(k) counts toward the loan?
No. Counting an account is not a withdrawal. The 10% additional tax applies to taxable early distributions. The lender’s 90% credit is a proxy for that cost, not a charge applied to you.
What if I am turning 59½ soon?
It may be worth asking about timing. On the qualifier path, the 401(k) credit rises from 90% to 100% at that age. Whether waiting is worth it depends on how close your counted total is to the loan amount and what the property market does in the meantime.
Can I combine a 401(k) with brokerage and savings accounts?
Yes, accounts combine on the qualifier path. Brokerage, CDs, money market and savings count at 100%, and your 401(k) at 90% or 100% by age. The total, after any money used at closing, must equal or exceed the loan amount.
Can I use my 401(k) to buy a rental property?
Through this program, investment property is available only on the depletion path. Many investors use DSCR instead, which qualifies primarily on the property’s rental income, subject to lender guidelines.
Next Step
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’s consumer mortgage business is licensed in 16 states, California among them, and it arranges these loans as a broker through select lenders, never as the lender. Reach the team at 828-256-2183.
Lendmire’s asset-based mortgage in California page presents the program for California borrowers.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving self-employed and high-net-worth borrowers in 16 states. Bank statement, P&L-only, 1099-only and asset-based mortgages are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. 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 Topic 558, Additional Tax on Early Distributions
3. IRS, Consequences of 401(k) Plan Hardship Distributions
4. Consumer Financial Services Review, CFPB Addresses Non-QMs Under the Ability-to-Repay Rule
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 Alabama Using an Asset Qualifier Mortgage · How to Buy Before You Sell in Pennsylvania Using an Asset Qualifier Mortgage · Can You Get an Asset Qualifier Mortgage With a Co-Signer?
Guides: Asset-Based Mortgage in California
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.