The Quick Read: Retirement accounts can count toward an asset-based mortgage without being withdrawn, but each path counts them differently. On the asset qualifier path, a 401(k) or IRA counts at 90% under age 59½ and 100% at 59½ or older. On the asset depletion path, retirement accounts count at 70% at any age. Qualifying on the balance is not a distribution, so it triggers no tax by itself.
- Two paths, never blended. The asset qualifier path covers the whole loan with eligible assets. The asset depletion path turns assets into monthly income, using usable assets divided by 60 months.
- Age matters on one path only. Age 59½ changes the credit on the qualifier path and does nothing on the depletion path.
- Counting is not withdrawing. An actual withdrawal is a separate event with its own tax rules, covered below.
- Access and vesting decide eligibility. Only vested, accessible money counts. Unvested or employer-locked funds do not.
- Everything is subject to underwriting. These are ceilings and floors available through select programs, never offers.
This guide is for the cash-heavy, income-light borrower: a retiree, someone who sold a business, an early-retired professional, or a household living on a portfolio. Balances are large and documented income is not. Lendmire is a broker that places these consumer mortgages through select lenders in its wholesale network. Here is how retirement money behaves in that setting.
What “retirement account rules” means on a mortgage file
The phrase covers three different situations, and most confusion comes from mixing them.
First, retirement money can be counted in place. The balance stays in the account, and the lender gives it credit toward qualifying. Nothing is sold and no tax is triggered.
Second, retirement money can be pulled out, for example to fund a down payment. That is a distribution, and the tax code governs what it costs.
Third, a retirement account can be the owner of the property, as with a self-directed IRA. That is a different product from the one described here.
This article spends most of its time on the first situation, because it is usually a more affordable use of retirement money. It then covers withdrawals and the edge cases where the general rule breaks. For the full program picture, see Lendmire’s asset-based mortgage programs. Note that investor rental financing is a separate business-purpose product. The asset-based mortgage here is a consumer loan.
How underwriting treats a retirement balance, step by step
Across the wholesale network, the process runs the same way on both paths.
1. The borrower picks a path. A borrower is qualified on one path at a time. The asset qualifier path asks whether eligible assets, after credit percentages, equal or exceed the entire loan. The asset depletion path asks whether the derived monthly income can carry the housing payment and other debts through the debt-to-income test.
2. The lender identifies eligible accounts. Brokerage, CDs, money market, savings, and retirement accounts all have a place, with different credit percentages.
3. The lender applies the credit percentage. This is the haircut. It reflects that a retirement balance is not fully liquid, because getting at it can cost tax or penalty.
4. The lender checks seasoning and statements. The assets are documented on both paths. “No income documentation” never means “no documentation.” Expect no traditional personal-income documentation, pay stubs or employment verification, but full statements.
5. The lender confirms access. The balance must be vested and available to the borrower. Funds tied up by an employer plan, or pledged as collateral, do not count.
6. The lender runs the final test. On the qualifier path, that is usable assets against the loan amount. On the depletion path, it is derived income against debt-to-income.
All of this is subject to underwriting. The lender’s own calculation governs.
The asset qualifier path: retirement money at 90% or 100%
On the asset qualifier path, assets alone cover the loan. No employment or income is documented. Through select programs, loans run up to $4,000,000, with leverage up to 80% on a purchase and 75% on a refinance of a principal residence or second home. Every figure here varies by lender and program.
Credit percentages here are generous. Brokerage accounts, CDs, money market, and savings count at 100%. A 401(k) or IRA counts at 90% for a borrower under age 59½ and at 100% at 59½ or older. Accounts combine.
Here is the arithmetic. Take an $800,000 loan. The borrower holds $330,000 in brokerage accounts, which counts at 100%, or $330,000. A 401(k) of $300,000 for a borrower under 59½ counts at 90%, or $270,000. Savings of $200,000 count at 100%, or $200,000. Together that is $800,000 of usable assets, which covers the loan and is reviewed on assets alone, subject to underwriting.
Age 59½ is the pivot. The 10% haircut disappears at that point, because the early-withdrawal penalty disappears with it. The logic follows the tax code. The IRS explains that amounts taken from an IRA or plan before 59½ are early distributions carrying an extra 10% tax unless an exception applies. A lender discounts the balance because that cost sits between the borrower and the cash.
Seasoning is 60 days, with two months of statements for each qualifying account. The credit floor is 600. Reserves are not required at or below 75% loan-to-value, and above that the lender sets them.
The asset depletion path: retirement money at 70%
The asset depletion path treats assets as a source of income. Usable assets, after haircuts, are divided by 60 months. The result is a qualifying monthly income, and that income must carry the full housing payment and other debts through the debt-to-income test.
Here retirement accounts count at 70% at any age. Age 59½ does not improve the percentage. Other credit: cash accounts and CDs at 100%, securities at 80%, private stock at 75%, and real-estate equity at 60%.
Take $1,500,000 in securities, which counts at 80%, or $1,200,000. Add $300,000 in cash at 100%. That is $1,500,000 usable, and dividing by 60 months gives $25,000 of monthly qualifying income. That income then has to carry the housing payment and other debts. The lender’s own calculation governs.
Leverage on this path is up to 80% on a purchase or rate-and-term refinance and 60% on a cash-out refinance for a principal residence or second home. On an investment property it is 65% on a purchase or rate-and-term refinance and 60% on a cash-out. Cash-out proceeds never count as qualifying assets. Loans run from $125,000 to $3,500,000.
Minimums apply. Qualified assets must be at least the lesser of $1,000,000 or 1.25 times the loan balance, and never below $250,000 liquid when asset depletion is the only income source. When asset income only supplements documented income, up to a 45% debt-to-income ratio, the minimum-assets rule is waived. Statements must be at least 120 days old at application, plus one within 45 days. Credit follows the lender’s matrix, and a first-time investor on this path needs 700.
Which path treats retirement money better?
For a borrower over 59½ with a large balance, the qualifier path often counts the account at full value. For a borrower under 59½, it still counts at 90%. The depletion path counts the same account at 70%, but it can work when assets are too thin to cover the entire loan and the income route is the better fit.
| Factor | Asset qualifier | Asset depletion |
|---|---|---|
| Retirement credit | 90% under 59½, 100% after | 70% at any age |
| Core test | Assets cover whole loan | Assets ÷ 60 = income |
| Income documented | None | Derived, then DTI test |
| Investment property | Not covered | Yes, at lower leverage |
| Max loan | $4,000,000 | $3,500,000 |
The strategy is to count the retirement money in place, so the borrower keeps cash for the down payment and avoids a taxable event. The investment-property row matters. Investment property is available only on the depletion path, at 65% on a purchase and 60% on a cash-out, so a borrower buying a rental with retirement assets works with the 70% credit.
When the general rule breaks
The rule that retirement money counts at a percentage has several edges.
Unvested or locked funds. Only vested balances count. Some employer plans restrict access while the borrower is still employed, and a balance the borrower cannot reach is not an asset the lender can credit.
Outstanding plan loans. A loan taken against the account reduces the usable balance. A lender looks at what is actually available, not the headline total.
Pledged or borrowed funds. These are not published as eligible on either path. Neither are cryptocurrency, precious metals, or collectibles. The documented route is to convert them to a seasoned cash balance in a regulated account, with the source reviewed by the lender.
Ineligible categories 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 do not count.
A retirement account as the owner. A self-directed IRA that owns a property is a separate structure, covered next.
Pulling the money out: what a withdrawal costs
Sometimes the right call is to withdraw. The borrower needs cash to close, and the lender wants it traced from the retirement account into the bank account and then to closing. Tax rules decide what that costs.
An early distribution is generally taxed as ordinary income, plus the 10% additional tax if no exception applies. IRS Topic 557 says the 10% applies to the part of the distribution included in gross income, and a rollover or transfer to another IRA or plan is not subject to it. Exceptions exist, such as disability, death, a $5,000 per-child amount for birth or adoption, and up to $22,000 for federally declared disaster distributions. A first-time homebuyer exception exists for IRAs, but it applies to a first home, so a rental purchase generally does not fit it.
A hardship withdrawal is not automatically penalty-free. It is still taxable income, and a penalty exception has to apply on its own terms.
Two comparisons help. A 401(k) plan loan is not taxed if repaid, while a taxable withdrawal is. A Roth IRA generally lets contributions come out without tax or penalty, while earnings have restrictions. Whether a program accepts borrowed funds as down payment is a program question, and it depends on the lender and the file.
Tax treatment varies by situation; consult a qualified tax professional before relying on any of this.
Self-directed IRAs and Solo 401(k)s as the borrower
This is where a standard asset-based mortgage does not fit. When an IRA owns real estate, the IRA is the borrower, and the debt generally has to be non-recourse. A personal guarantee can create a prohibited transaction, according to IRA Financial, and a violation can disqualify the account. The consumer mortgages described here are made to individuals who will occupy the home, so an IRA-owned property is outside this product. Non-recourse lenders are a small pool and typically price and size loans differently.
Ownership rules are strict. The White Coat Investor notes you can own real estate in an IRA but cannot use it personally, and all income and expenses must flow through the IRA. A personal residence or second home is therefore not an IRA investment.
Leverage inside an IRA brings a tax wrinkle. Income from debt-financed property can be taxed as unrelated debt-financed income. Directed IRA gives the illustration: with 60% non-recourse debt on a purchase, 60% of net income is treated as debt-financed. Practitioners say qualified plans such as a Solo 401(k) may be treated differently from IRAs on this point. That is a tax-professional question, and nothing here should be read as advice on it.
Documents, seasoning, and moving money
A clean file helps more than a clever structure. Expect to provide:
- The latest statements for each retirement account, showing the vested balance.
- Two months of statements per account on the qualifier path, or statements at least 120 days old plus one within 45 days on the depletion path.
- Evidence of access if the plan restricts withdrawals.
- A paper trail for any withdrawal, from the plan to the bank to closing.
Moving money creates questions. A large deposit has to be sourced. Rolling funds between accounts can reset the clock on seasoning, so the borrower should ask before moving anything. Sale-of-business, inheritance, and legal-settlement funds are excused from the depletion path’s statement seasoning, and it is worth raising those early.
A decision framework
Start with age and the shape of the balance.
- Over 59½ with assets that cover the loan: the asset qualifier path counts retirement at 100%. Counting in place beats withdrawing.
- Under 59½ with assets that cover the loan: the qualifier path counts retirement at 90%. The 10% haircut is usually cheaper than a taxable withdrawal.
- Assets that fall short of the loan but are large: the depletion path may work if derived income carries the payment. Retirement counts at 70%.
- Buying a rental with these assets: only the depletion path applies, at lower leverage.
- Cash needed at closing: compare a plan loan, a withdrawal, and a different asset to sell. Run the tax math first.
The strongest file usually keeps retirement money working as a counted asset and uses cash or brokerage for the down payment. The weakest file withdraws retirement money, pays tax and a penalty, and ends up with less net cash than planned.
Key Terms Defined
Vested balance: the portion of a retirement account that legally belongs to the borrower, regardless of employment status.
Haircut: the discount a lender applies to an asset, so only a percentage of the balance counts.
Asset qualifier path: the route where eligible assets must cover the entire loan and no income is documented.
Asset depletion path: the route where usable assets divided by 60 months become monthly qualifying income.
Early distribution: money taken from a retirement account before age 59½, generally carrying an added 10% tax unless an exception applies.
Non-recourse loan: a loan where the lender looks only to the property, not to the borrower personally, for repayment.
Frequently Asked Questions
Do I have to withdraw my 401(k) or IRA to use it?
No. On both paths the balance counts in place, with the credit percentages above. Counting a balance toward qualifying is not a distribution, so it triggers no tax. A withdrawal only happens if the borrower chooses to pull money for cash to close.
Does my age change how my IRA is counted?
On the asset qualifier path, yes. Retirement accounts count at 90% under age 59½ and 100% at 59½ or older. On the asset depletion path, retirement counts at 70% at any age. Both are subject to underwriting.
Can I use a Roth IRA?
Roth balances can be eligible retirement assets, but lenders differ on how they treat them, and the program percentages above are the starting point. Roth contributions generally come out without tax or penalty, while earnings have restrictions, which affects what a withdrawal costs.
Can I use retirement money as the down payment?
Often yes, but it depends on how. Leaving it in place and counting it is usually cheaper than a withdrawal, which is taxed and may carry the 10% additional tax. Borrowed funds, including some plan loans, are a program question for the lender.
Can my IRA buy the property directly through this loan?
Not through this product. An IRA as owner needs non-recourse financing, and the consumer mortgage here is made to an individual. Self-directed IRA purchases are a separate structure with their own rules.
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. For related reading, see the guide Asset Depletion Mortgage Rules for Retirement vs Liquid Assets.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. Bank statement, P&L-only, 1099-only and asset-based mortgages are arranged through wholesale lending partners for borrowers whose traditional personal-income documentation understates their income, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. IRS – Retirement topics: Exceptions to tax on early distributions
3. IRA Financial – Pitfalls of owning real estate in an IRA
4. White Coat Investor – Prohibited transactions in IRAs
5. Directed IRA – What is UDFI
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Asset-Based Mortgage vs Home Equity Investment for Retirees Who Need Cash · How to Buy Before You Sell in Virginia Using an Asset Qualifier Mortgage · Can an Asset-Based Mortgage Fund a Jumbo Purchase?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.