The Quick Read: Under age 59½, your 401(k) counts toward an asset qualifier mortgage at 90% of its vested balance through select programs, subject to underwriting, and the same account counts at 70% if you turn assets into monthly income instead. Tennessee does not change those percentages. You also do not have to withdraw a dollar for the account to count.
- On the asset qualifier path, eligible assets must equal or exceed the entire loan amount, and no employment or income is documented.
- A 401(k) counts at 90% under age 59½ and 100% at 59½ or older on that path. Brokerage, CDs, money market and savings count at 100%.
- On the asset depletion path, a 401(k) counts at 70% at any age, and the total is divided by 60 months to create qualifying income.
- Counting an account is not the same as cashing it out. A withdrawal only happens if you choose to use the money for closing.
- The assets are fully documented either way. Only income documentation is dropped on the qualifier path.
Lendmire is a mortgage broker. It arranges these loans through select lenders in its wholesale network, and the lender’s own underwriting decides every file.
Which Path Fits a Retirement-Heavy Borrower?
Two different paths hide under the phrase “asset-based mortgage.” You are judged on one at a time, never both. Picking the right one matters more than any percentage.
The asset qualifier path asks one question. After the credit percentages are applied, do your eligible assets equal or exceed the whole loan? If yes, the loan is reviewed on assets alone. No employment is documented. No income is documented. It fits principal residences and second homes, with leverage up to 80% on a purchase and 75% on a refinance. Loans run up to $4,000,000. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
The asset depletion path works differently. The lender applies haircuts to your assets, divides the usable total by 60 months, and treats the result as monthly income. That income then carries your housing payment and other debts through a debt-to-income test. Loans run from $125,000 to $3,500,000. This is also the path where an investment property can be financed.
Think of it this way. The qualifier path says your assets cover the loan outright. The depletion path says your assets become a paycheck.
Lendmire sees this pairing most often with retirees, early-retired professionals, people who sold a business, and households living off a portfolio. Their balances are large. Their documented income is small.
How Does a 401(k) Actually Get Counted?
Underwriting treats a 401(k) as a seasoned, documented asset that is discounted for how hard it is to reach. The lender never asks you to liquidate it. It looks at the vested balance on the plan statement and applies a percentage.
| Factor | Asset qualifier path | Asset depletion path |
|---|---|---|
| What carries the loan | Assets cover the whole loan | Assets become monthly income |
| 401(k) under 59½ | Counts at 90% | Counts at 70% |
| 401(k) at 59½ or older | Counts at 100% | Counts at 70% |
| Brokerage / cash | 100% (brokerage, CDs, money market, savings) | Cash and CDs 100%, securities 80% |
| Statements | 60 days seasoning, two months per account | 120-day-old statement plus one within 45 days |
| Credit | 600 minimum score | The lender’s score and loan-amount matrix |
All figures are typical ranges across select programs in the network, subject to underwriting.
Here is the step-by-step in plain order.
1. Gather the statements. The plan-issued statement showing your vested balance is the usual proof. Unvested employer match does not count.
2. Apply the credit percentage. The percentage depends on the path and, on the qualifier path, on whether you are under 59½.
3. Combine accounts. On the qualifier path, accounts stack. Brokerage, savings and retirement balances add together after their own percentages.
4. Plan for money you will spend. Cash you put toward the down payment and closing costs leaves your accounts, so confirm early whether the lender measures your assets before or after those funds go out.
5. Compare to the loan, or divide by 60. The qualifier path compares the total to the loan amount. The depletion path divides it by 60 and runs the result through debt-to-income.
Programs differ on step four. Some look only at what remains after closing. Others look at the starting pool. Ask early, because it changes how much room you really have.
Why Does Age 59½ Matter?
Age 59½ matters because retirement money gets more expensive to reach before that age, and lenders price that cost into the percentage. Under 59½, IRS Topic 558 says the law adds a 10% additional tax on certain early distributions. A 401(k) is one of the plans it covers. The threshold is 59½, not 59.
Ordinary income tax is a separate cost and applies to traditional pre-tax money at any age. Tax treatment varies; consult a qualified professional.
That is the reason for the lower credit on the qualifier path. A 401(k) under 59½ counts at 90%. At 59½ or older, it counts at 100%. The lender is not charging you the penalty. It is trimming the balance because that money is less liquid.
The depletion path ignores your age for this purpose. A 401(k) counts at 70% whether you are 45 or 70. Many people assume age is a hard cutoff. In this network it is not. Across the lenders Lendmire works with, the haircut is a lender policy choice, not a federal rule. Some programs elsewhere in the market discount retirement money more heavily or exclude it under 59½. The network figures above are the ones that apply here.
The federal rules that govern lending only require a lender to make a reasonable, good-faith judgment that you can repay, and to verify the assets it relies on with reliable third-party records. That comes from Regulation Z’s ability-to-repay section. The haircut percentage is private policy built on top of it.
Worked Example: A 401(k) Under 59½
These numbers are illustrative. The lender’s own calculation governs.
Qualifier path. Say you want an $800,000 loan on a principal residence. You hold $330,000 in brokerage accounts, $300,000 in a 401(k), and $200,000 in savings.
- Brokerage at 100% counts $330,000.
- The 401(k) under 59½ at 90% counts $270,000.
- Savings at 100% counts $200,000.
That is $800,000 of usable assets against an $800,000 loan. The loan is reviewed on assets alone, subject to underwriting. At 59½ or older, the same 401(k) would count at 100%, and the total would be $830,000.
Depletion path. Take the same $300,000 401(k). At 70% it counts $210,000. Divided by 60 months, that adds $3,500 of monthly qualifying income. Stack it with other assets and the monthly figure grows. Then the whole amount must carry the housing payment and other debts through the debt-to-income test.
The same account is worth more as loan coverage on the qualifier path than as income on the depletion path. For a borrower whose assets already roughly equal the loan, the qualifier path is often the cleaner fit. For a borrower with assets well above the loan who wants to keep cash liquid, the depletion path may work better.
Where the General Rule Breaks
A few real situations change the answer.
Penalty exceptions do not erase the haircut. The IRS lists exceptions to the 10% tax, such as disability and separation from service in or after the year you turn 55. Fidelity explains the Rule of 55 as applying if you leave your employer in the year you turn 55 or later. Lenders generally still apply the program percentage. You do not get a higher credit for being eligible for an exception. Ask the lender case by case.
Roth 401(k) is not a Roth IRA. NerdWallet notes that, unlike a Roth IRA, you cannot withdraw Roth 401(k) contributions whenever you choose. Programs here generally apply the same retirement percentage across account types.
Vesting and plan rules. Only the vested balance counts. Some plans restrict in-service withdrawals. Those restrictions matter to how a lender views access, so bring the plan details with your statement.
Borrowed funds. A 401(k) loan you already took reduces the balance on your statement. Pledged or borrowed funds are not published as eligible assets on either path.
Accounts already paying you. If a retirement distribution is documented as income, the same balance generally is not also counted as an asset. Double counting is not allowed.
Assets that do not count. On the depletion path, custodial accounts, deferred compensation, escrow accounts, foreign funds, cash on hand, stock options and non-vested restricted stock units are not eligible. Cryptocurrency, precious metals, collectibles and similar holdings are not published as eligible on either path. The documented route is to convert them to a seasoned cash balance in a regulated account. The lender reviews the source of those funds.
Agency rules differ. Fannie Mae and Freddie Mac have their own asset-based rules for retirement accounts. Those are separate programs and do not set the percentages above.
Should You Cash It Out?
Usually not. Counting a 401(k) on paper costs nothing. The cost arrives only if you pull money out to fund the down payment or closing.
Britannica notes that early withdrawals face a 20% withholding and a 10% penalty. The 20% is withholding, not an added penalty. Still, a withdrawal under 59½ can leave you short of what you planned to spend. Many borrowers use brokerage or savings dollars for closing and let the retirement balance sit as qualifying support.
On reserves specifically: the qualifier path needs none at or below 75% loan-to-value. Above that, the lender sets them. The depletion path publishes no reserve months.
What About a Rental Property?
Pause here if the property is a pure rental. The asset qualifier path is for principal residences and second homes. Investment property is financed 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. A first-time investor on that path needs a 700 score.
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 tests the property, not you. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. If the rent covers the payment, your 401(k) never enters the picture. If rent falls short, programs below 1.00 coverage are available through select lenders in the network, though leverage and terms adjust. Alternatively, the asset path or lower leverage can close the gap. Lendmire’s complete DSCR loans guide walks through that decision.
Is There Anything Different in Tennessee?
No. Lendmire’s consumer lending is licensed in 16 states, and Tennessee is one of them. The program figures here are identical whether the home is in Nashville, Knoxville, Memphis or a small town. No Tennessee statute or regulator rule changes how a 401(k) is treated here.
What does vary by county is the cost of the home itself: local prices, property taxes and insurance. Those feed into your housing payment. On the depletion path, they matter because that payment runs through debt-to-income. They are context, not program parameters.
Documentation Checklist
Assets are documented on both paths. “No income documentation” never means “no documentation.”
- Two months of statements for each qualifying account on the qualifier path, with 60 days of seasoning.
- On the depletion path, a statement at least 120 days old plus the most recent one within 45 days.
- A plan statement showing your vested 401(k) balance.
- Plan terms if withdrawals are restricted.
- Source records for any large recent deposit. Sale-of-business, inheritance and legal-settlement funds are excused from the depletion path’s seasoning.
- Explanations for recent asset changes.
Common Mix-Ups
- “You must be 59½ to use a 401(k).” No. Under 59½ it counts at 90% on the qualifier path and 70% on the depletion path.
- “The haircut is a government rule.” No. It is lender policy.
- “Counting it means cashing it out.” No. It is evidence of repayment capacity.
- “The 20% withheld is the penalty.” No. The penalty is 10%.
- “Asset qualifier means no documentation.” No. Income is not documented, but every dollar of assets is.
Key Terms Defined
Asset qualifier: A path where your eligible assets, after credit percentages, must equal or exceed the whole loan amount.
Asset depletion: A path that divides usable assets by 60 months to create monthly qualifying income.
Haircut: The share of a balance a lender does not count, reflecting how hard the money is to reach.
Vested balance: The portion of your 401(k) that is yours to keep, as shown on the plan statement.
Seasoning: How long funds must have sat in an account before the lender will count them.
Debt-to-income: The share of monthly income that goes toward debts, including the new housing payment.
Frequently Asked Questions
Do I need to be retired to use a 401(k) this way?
No. These programs do not require retirement. They look at the vested balance and the percentage that applies to your age and path. Retirees, early-retired professionals and business sellers use them often, but employment is not the test on the qualifier path.
Will my 401(k) count at full value at 55?
Not on the qualifier path. Under 59½ it counts at 90%, and at 59½ or older it counts at 100%. On the depletion path it counts at 70% at any age. A Rule of 55 exception does not raise the credit.
Can I combine a 401(k) with brokerage and savings?
Yes. On the qualifier path, accounts combine after each gets its own percentage. The total is compared to the loan amount.
Does an existing 401(k) loan hurt?
It reduces the balance on your statement, so it reduces what counts. Pledged or borrowed funds are not published as eligible assets. The lender’s review controls how it treats any plan loan.
Do I still need traditional personal-income documentation or pay stubs?
On the qualifier path, no employment or income is documented. On the depletion path, derived income runs through debt-to-income, and it can also supplement documented income up to a 45% ratio. Assets are documented on both paths. Everything is subject to lender guidelines and underwriting.
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. Call 828-256-2183 or request a quote. A 401(k) that sits quietly in the background can do real work for a Tennessee buyer, and it does it without leaving the plan.
Lendmire’s asset-based mortgage in Tennessee page presents the program for Tennessee 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
3. Fidelity: Early 401(k) withdrawal
5. Britannica: 401(k) early withdrawal penalty
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 Co-Borrowers Combine Accounts on a Florida Asset Qualifier Mortgage? · How a 401(k) Counts Toward a North Carolina Asset Qualifier Mortgage Under Age 59½ · How Much of a Brokerage Account Counts Toward a North Carolina Asset Qualifier Mortgage?
Guides: Asset-Based Mortgage in Tennessee
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.