Retirement Accounts
This section talks about how you can use money saved in retirement accounts when you’re buying a house. These accounts include individual retirement accounts (IRA/SEP/Keogh accounts) and 401(k) accounts. The money in these accounts can help you pay for your down payment, the closing costs (fees and expenses you need to pay when you close your mortgage), and reserves (extra money lenders want you to have saved to cover future mortgage payments). There are some rules about using this money that we’ll go over.
First, the lender (the company giving you the mortgage) needs to check that you really own the retirement account. They also need to make sure the account is “vested.” That means the money in the account is yours to use, and you can take it out whenever you want, no matter if you’re working or not.
If your retirement savings are in stocks, bonds, or mutual funds, there are extra rules. These types of accounts have to meet specific requirements. The rules are in another section called “B3-4.3-01, Stocks, Stock Options, Bonds, and Mutual Funds.” The lender has to figure out how much the stocks, bonds, or mutual funds are worth. They also need to decide if they need proof that you’ve taken the money out when you’re using it for your down payment and closing costs.
However, if you’re using your retirement account as proof that you have enough savings to cover future mortgage payments (reserves), you don’t actually have to take the money out of your retirement account. Fannie Mae, the government-backed company that sets these rules, just wants to see that you have the funds available if needed.
References
For more details, visit Retirement Accounts of the Fannie Mae Selling Guide.