reserves - cash vs. 401k

Is the 401k in cash?

Im not sure if it is common for banks to require cash reserves but it certainly isn't out of the ordinary. We allow 401ks to be used for reserves but only 60% of the value and you must have the ability to draw from it or take a loan from it prior to retirement. You should also compares the reserve requirements from lender to lender. We require 2 months of housing paying reserves post-closing for loan amounts up to $625,500, 6 months for loans up to $1M and 12 months for loans above $1M and 24 months for loans above $2M.
Sunny.hong@bankofamerica.com

i hope your buying a condo..if its a coop you have a whole new evaluation process to go through regarding post closing liquidity and no, 401k is not considered liquid. The board will take into account the whole picture though..employment situation, liquid assets + retirement and other assets/liabilities post closing

Building on what urbandigs said for a coop, admissions committees on which I have sat have viewed 401k/IRA/etc as accounts that show prudent savings as part of a longterm financial plan which can help demonstrate that an applicant is a responsible, fiscally well-managed individual. We did not give much if any weight to the value of the account when determining if the individual had sufficient assets to acquire the coop (different case if individual very close to or at retirement age). The thinking generally is that if there were some period of financial stress for the applicant, raiding one's retirement (a lost resort) was not the sort of rainy-day-plan we found acceptable. Were someone to have to do that, given the severe penalties, they would have to be in quite dire straights and we didn't want to be dealing with that type of situation.

401k and IRA assets are exempt from attachment by creditors under NYS law. Therefore they are usually disregarded or highly discounted because a general judgment creditor (lender or coop board) would not be able to attach such an asset following any potential litigation.

During my preapptoval, 401K was considered. I'd not think you'd get penalized for investing in your future/retirement. Coops will discount but they definitely consider these monies. Can't be faulted for being responsible.

So, ultimately discovered some banks will consider a portion of the 401k, others won't consider it all. BOA didn't, Wells didn't, Chase did. Jumbo loan <$1m. This is for a condo.

401K balances helped us obtain pre-approval, but when it came down to the commitment, we "weren't qualified" to use it as part of our reserves. Be ready for anything.