Printed from at 07:50 AM, May 24 2016

Talk » Sales » Discussing 'Does 401k count towards liquid asset to buy co-op?'

Does 401k count towards liquid asset to buy co-op?


Co-ops generally need 20% down and say 2 years of maintenance mortgage worth of liquidity in bank balance. Can 401k count towards it, given that you can borrow against it, and it's your own money? I heard somewhere that 401k might not count as 2 yeras of liquidity required post-closing, in that case can you use money borrowed from your own 401k towards down payment instead, to use the bank cash towards 2 year liquidity? Thanks in advance!

Unless you're of retirement age, any respectable co-op will not view your 401k as liquid by any means...neither will a lender.

When you think about it, should they? Do you really want to approve a borrower/shareholder who may have to rely on his/her 401k before they qualify for to withdraw without penalty?

As a borrower, I know if feels like it should be included since it's technically "liquid," though you'd be stung by some big penalties if you had to withdraw funds early. The borrowing against it argument is a bad one, cause that would be debt...

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it's looked at, but not counted. so if you're borderline and you have $200K in 401K, it will push you through. $50K won't do anything.

Just went through this recently for a condo purchase where we needed to show 1 year's liquidity. We had enough in assets, but the lender miscalculated and said we were borderline by about 7K. Our 401K assets are sizable, but were no help at all for a 7K deficiency. Don't know if coop standards are more flexible, though.

Coop standards are tougher, generally. 401k savings can flesh out a picture of a financially well positioned and responsible prospective buyer, but e account is not typically considered as an accessible asset by admissions committees in a coop.

How about using 401k fund for the down payment? That way you can have a larger bank balance to meet post-closing liquidity requirements. Does this work?

401K accounts are exempt from attachment in a court judgment. In NYS, so is life insurance, nonqualified deferrals, IRAs and certain trust accounts. If the asset cannot be attached upon judgment it will not count from both a lender and a co-op board perspective. Agree they may be a factor in a "close" situation.

Also, to clarify, this is about borrowing from 401k (not withdrawing) and paying the interest to yourself.

You can only borrow 50% of your 401(k), up to $50,000. (These are IRS rules) That won't get you very far, but yes it could fund a down payment.

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