The Quick Read: Under age 59½, a 401(k) counts toward an asset qualifier mortgage at 90% of the vested balance, and the borrower does not have to withdraw a dollar. After 59½ the same balance counts at 100%, subject to underwriting and the lender’s own calculation.
- On the asset qualifier path, eligible assets must cover the entire loan. No employment or income is documented.
- A 401(k) or IRA counts at 90% under 59½ and 100% at 59½ or older. Brokerage, CDs, money market and savings count at 100%.
- Accounts combine. Two months of statements per account and 60 days of seasoning apply.
- On the asset depletion path, the same 401(k) counts at 70% at any age and becomes monthly income.
- Alabama is one of the 16 states where Lendmire’s consumer lending is licensed. The program figures do not change by state.
Lendmire is a broker. It places these files with select lenders in its network, and every figure here is subject to underwriting.
What Is an Asset Qualifier Mortgage?
An asset qualifier mortgage is a consumer loan qualified on assets alone. Eligible assets, after the credit percentages, must equal or exceed the entire loan amount. The file documents no employment and no income.
That is different from “no documentation.” The assets are documented in full. Statements, seasoning and source review all apply. The borrower provides no traditional personal-income documentation, pay stubs or employment verification.
It suits a cash-heavy, income-light borrower. Think of a retiree, someone who sold a business, an heir, a settlement recipient, or an early-retired professional living off a portfolio. Balances are large. Taxable income is small.
Across Lendmire’s wholesale network, there are two asset-based paths, and a borrower is reviewed on one at a time:
| Factor | Asset qualifier | Asset depletion |
|---|---|---|
| Test | Assets cover the whole loan | Assets become monthly income |
| Divisor | None | 60 months |
| 401(k) credit | 90% under 59½, 100% at 59½+ | 70% at any age |
| Income documented | None | Derived income runs through DTI |
| Loan range | Up to $4,000,000 | $125,000 to $3,500,000 |
Never blend the two tables. A figure belongs to one path only. Lendmire’s asset-based mortgage program page lays out both paths in one place.
How Underwriting Treats a 401(k) Step by Step
Underwriting treats the 401(k) as a balance to verify, not cash to spend. The steps run in a fixed order.
1. Confirm the vested balance. Only the vested portion counts. The document is a custodian statement showing that balance.
2. Apply the age test. Age at application sets the tier. Under 59½, the 401(k) counts at 90%. At 59½ or older, 100%. Underwriters treat 59½ as a flat line.
3. Add the other eligible assets. Brokerage, CDs, money market and savings each count at 100%. Accounts combine.
4. Compare the total to the loan amount. On the qualifier path, usable assets must equal or exceed the entire loan.
5. Check seasoning. The path wants 60 days of seasoning and two months of statements for each qualifying account.
6. Review credit and leverage. The path’s published credit floor is 600. Leverage tops out at 80% on a purchase and 75% on a refinance, on a principal residence or second home.
Nothing is liquidated. The balance counts on paper, so qualifying triggers no tax and no penalty. Whether cash-out proceeds are allowed on this path is set by the lender and is not published, so plan around purchases and refinances.
Why the Discount Exists Under 59½
The 90% credit reflects the cost of reaching the money. No federal rule sets it for these loans. Each program writes its own asset table.
The tax side is real, though. Under section 72(t), distributions taken before age 59½ carry an additional 10% tax, per the IRS page on substantially equal periodic payments. That 10% sits on top of ordinary income tax. A dollar in a 401(k) is worth less to the borrower after tax than a dollar in savings. The haircut reflects that gap.
The discount is a valuation convention. It is not a withdrawal and not a penalty. Crossing 59½ moves the 401(k) from 90% to 100% on the qualifier path.
Tax treatment varies; consult a qualified professional.
A Worked Example With Mixed Accounts
Run the numbers on a borrower seeking an $800,000 loan on the qualifier path. These figures are illustrative, and the lender’s own calculation governs.
- Brokerage accounts: $330,000 at 100% counts $330,000.
- 401(k) under 59½: $300,000 at 90% counts $270,000.
- Savings: $200,000 at 100% counts $200,000.
Usable assets total $800,000. That equals the loan, so the file is reviewed on assets alone, subject to underwriting.
Notice what the 401(k) did. Its full $300,000 balance became $270,000 of credit. At 59½ or older, that line would count $300,000. The borrower who waits past the line has more headroom from the same account.
Now the depletion path. Say $1,500,000 in securities counts at 80%, which is $1,200,000, plus $300,000 in cash at 100%. That is $1,500,000 usable, divided by 60 months, which is $25,000 of monthly qualifying income. That income then carries the housing payment and other debts through the debt-to-income test. A 401(k) added to that file would count at 70%, not 90%. The paths use different tables, so the same balance can be worth more on one than the other.
Where the General Rule Breaks
The 90% and 100% tiers hold on most files. These edge cases are where files get kicked back.
Penalty exceptions don’t change the count. The Rule of 55 and substantially equal periodic payments allow some early withdrawals without the 10% penalty, as Hartford Funds explains. A borrower may qualify for one personally. Underwriters generally do not credit it. The age line is still 59½. Ask the specific program before assuming otherwise.
An outstanding 401(k) loan lowers the vested balance. Hartford Funds notes the maximum plan loan is the lesser of $50,000 or 50% of the vested balance. Whatever you borrowed no longer sits in the account. The statement shows the reduced figure, and that is what gets counted.
Roth 401(k) accounts may be treated differently. Qualified-distribution rules for Roth money depend on a five-year aging test plus age. A lender may handle Roth balances separately from traditional ones. Raise it up front.
Restricted access. If the plan limits access to the balance, expect questions. Ownership, vesting and access all get reviewed.
Assets that don’t count. Cryptocurrency, precious metals, collectibles, pledged or borrowed funds, and business accounts beyond the borrower’s 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. The lender reviews the source.
One balance, one job. A balance counted to qualify generally can’t also serve as separate reserves. On the qualifier path, no reserves are required at or below 75% loan-to-value. Above that, the lender sets them.
Hardship is not an exception. The IRS says there is no exception to the 10% additional tax specifically for hardships, in its IRA distribution FAQ. That page addresses IRAs. For 401(k)s, the IRS exceptions chart shows which exceptions apply to which plan type.
What Is Alabama-Specific?
Almost nothing in the program is. Leverage, asset credit, seasoning and credit floors are set by the program and lender, not the state. An Alabama borrower faces the same 90% and 100% tiers as anyone else.
What changes is licensing and local context. Lendmire’s consumer lending is licensed in 16 states, and Alabama is one of them. Property taxes, insurance and local prices vary by county and are context, not program parameters. The loan is a consumer mortgage, so consumer disclosures apply.
What the Decision Looks Like in Practice
Start with which path fits.
If liquid assets can cover the whole loan after the credit percentages, the qualifier path is the cleaner fit. No income is documented, and no divisor shrinks the number. A borrower under 59½ with a large 401(k) loses 10% of that balance’s credit. That is often tolerable.
If assets can’t cover the loan but are large enough to produce income, the depletion path may work. It divides usable assets by 60 months. It requires 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 depletion is the only income source. The 401(k) counts at 70% there. Leverage on a principal residence or second home runs up to 80% on a purchase or rate-and-term refinance and 60% on a cash-out. Investment property runs 65% and 60%. Statements must be at least 120 days old, plus one within 45 days.
If the file falls short, the options are:
- Add other eligible assets, such as seasoned savings or brokerage balances.
- Wait until 59½, when the 401(k) moves from 90% to 100% on the qualifier path.
- Choose a smaller loan or a larger down payment.
- Move to the other path if its table fits better.
- Look at a different program, such as a bank statement loan if income is documented through deposits.
Counting a balance without withdrawing it keeps the account compounding. It also avoids the tax hit that a distribution would trigger.
Key Terms Defined
Vested balance: the part of a 401(k) the borrower owns outright, as shown on the custodian statement.
Asset qualifier: a path where eligible assets, after credit percentages, must cover the entire loan.
Asset depletion: a path that divides usable assets by 60 months to create monthly qualifying income.
Seasoning: the period funds must sit in an account before they count.
Section 72(t): the tax rule that adds a 10% tax to most distributions before age 59½.
Frequently Asked Questions
Do I have to cash out my 401(k) to use it?
No. The lender verifies the vested balance from statements. Counting the account triggers no withdrawal, tax or penalty. A distribution is a separate event with its own tax result.
Does being under 59½ make the 401(k) ineligible?
No. On the qualifier path it counts at 90% under 59½ and 100% at 59½ or older. On the depletion path it counts at 70% at any age. All figures are subject to underwriting.
Can I combine a 401(k) with brokerage and savings accounts?
Yes. Accounts combine on the qualifier path, and the total must equal or exceed the entire loan. Each account needs two months of statements and 60 days of seasoning.
Does Alabama change the asset percentages?
No. The percentages, leverage and credit floors don’t change by state. Alabama is one of the 16 states where Lendmire’s consumer lending is licensed.
Does an outstanding 401(k) loan matter?
Yes. It lowers the vested balance on the statement, and that reduced balance is what gets counted. Disclose it early so the numbers on the file match.
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. Programs change. This is not a commitment to lend.
Lendmire’s asset-based mortgage in Alabama page presents the program for Alabama 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 – Substantially equal periodic payments
2. Hartford Funds – Tapping retirement accounts before 59½
3. IRS – Retirement plans FAQs regarding IRA distributions
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 Much of a Brokerage Account Counts Toward a Washington Asset Qualifier Mortgage? · Can Pledged or Margined Securities Count Toward an Asset Qualifier Mortgage? · How to Buy Before You Sell in Virginia Using an Asset Qualifier Mortgage
Guides: Asset-Based Mortgage in Alabama
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.