Matching 401K Contribution Count as Income ? (loan, 2013, real estate, credit score)
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My employer matches my 6% 401K contribution and adds another 5% on top of that for a total of 17%, of which my employer is giving me 11%.
My employers contribution is 100% vested right away.
Can an employers 11% contribution count as additional income for mortgage loan purposes for anyone over 59.5 years old, since they actually do have the right to withdraw that from their 401K it on a yearly basis if they wish?
Lenders focus on their ability to sell the loan. They look for 'periodic regular income' and usually ignore potential income even when it is guaranteed and substantial. I doubt a history of contributions that are not mandatory will count for much.
I have a portfolio larger than the loan I want that underwriters do not want to count because I manage it rather than letting an institution disburse it to me on a regular basis.
Thanks. So in this context the employers contribution per se is not the determinant of whether a 401K can be counted as income, but rather on whether any distributions are being regularly made from the plan.
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Employee contributions to 401K and other investments is not considered regular income because it could be stopped at any time, and the bank does not want you to have to dip into it to make your house payments. I would say that if you are looking for 401k matching to boost your income you are too close to the edge, and probably looking at a home that's more than you can afford.
I sure hope not. One reason for the housing crisis is the issuance of bad mortgages to people who are not eligible because of poor income that does not support the issuance of the mortgage. The company match of 11% is real questionable for the future. It is something that a company can discontinue instantly and is something that companies have been eliminating and revisiting as to rich for the company. No mortgage company should be considering 11% as income for future years. And you should not be trying to obtaining a mortgage based on having questionable means to repay it.
If the market takes a hit, your 401k could take a loss far greater than 11%. It isn't income until you take it as a disbursement.
I don't think you are paying taxes on that contribution so it would not likely pass the income test according to the IRS. Imagine if it got counted as income and then the IRS decided you had underpaid your taxes.
...I would say that if you are looking for 401k matching to boost your income you are too close to the edge, and probably looking at a home that's more than you can afford.
Quote:
Originally Posted by jaybb
I sure hope not. One reason for the housing crisis is the issuance of bad mortgages to people who are not eligible because of poor income that does not support the issuance of the mortgage. The company match of 11% is real questionable for the future. It is something that a company can discontinue instantly and is something that companies have been eliminating and revisiting as to rich for the company. No mortgage company should be considering 11% as income for future years. And you should not be trying to obtaining a mortgage based on having questionable means to repay it.
Actually, both your "assumptions" are way off base in this instance, and cdelena answered this question more accurately and to the point.
And that point is my 401K may certainly count as income if I choose to take regular periodic payments, because at that time any such disbursements will be taxed as regular income. And if I choose to make a withdrawal equivalent to 11% of my current yearly salary, that would be effectively make the 11% count. But I do not need or intend to do so.
I work for a fortune 50 company which offered select employees in a new division it acquired several years ago 5% on top of the standard 6% 401K contribution. This is one of those benefits that will be quietly phased out as eligible employees retire or leave, since it is no longer available to new hires. My division is profitable enough that we consistently received generous bonuses over the past few years, and my division recently started a strong growth spurt with new long term contracts that will carry over for a few more years. A few years of such compensation for someone with a six figure salary can go a heck of a long way to making a beaten down 401K recover nicely, and it has.
To suggest I have poor income or means is nonsense. One does not get an 800+ credit rating living on the edge. My question was more one of curiosity than necessity, and related to mortgage questions on real estate investing rather than primary home ownership.
Actually, both your "assumptions" are way off base in this instance, and cdelena answered this question more accurately and to the point.
And that point is my 401K may certainly count as income if I choose to take regular periodic payments, because at that time any such disbursements will be taxed as regular income. And if I choose to make a withdrawal equivalent to 11% of my current yearly salary, that would be effectively make the 11% count. But I do not need or intend to do so.
I work for a fortune 50 company which offered select employees in a new division it acquired several years ago 5% on top of the standard 6% 401K contribution. This is one of those benefits that will be quietly phased out as eligible employees retire or leave, since it is no longer available to new hires. My division is profitable enough that we consistently received generous bonuses over the past few years, and my division recently started a strong growth spurt with new long term contracts that will carry over for a few more years. A few years of such compensation for someone with a six figure salary can go a heck of a long way to making a beaten down 401K recover nicely, and it has.
To suggest I have poor income or means is nonsense. One does not get an 800+ credit rating living on the edge. My question was more one of curiosity than necessity, and related to mortgage questions on real estate investing rather than primary home ownership.
Don't get so defensive. You said nothing in your original post about your income, savings, credit score, etc. -- you just asked a question that made it sound as if you really needed the 11% 401k match to count in order for you to qualify for a mortgage. Now you're telling us it's not the case. Well, all the other posters had to go on was your original post.
I actually think your question was really interesting, and found the answers to be informative too.
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