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Conventional loans · Fannie Mae B3-4.3-03Using a 401(k) or IRA for the down payment: what the lender needs

On a Fannie Mae loan, vested funds in an individual retirement account (IRA, SEP or Keogh) or a tax-favored retirement savings account such as a 401(k) are acceptable for the down payment, closing costs and reserves. The lender must verify that the buyer owns the account, that the funds are vested, and that the account allows withdrawals regardless of the buyer's current employment status. If the retirement money is invested in stocks, bonds or mutual funds, Fannie Mae's rules for those assets decide how the value is counted and whether the lender needs proof that the buyer actually received the money when it is used for the down payment and closing costs. When retirement funds count only as reserves, Fannie Mae does not require them to be withdrawn. Taxes and early-withdrawal penalties on taking money out are a separate question for the buyer's tax professional – and a withdrawal or loan takes time to arrive, so it should be started well before closing.

What Fannie Mae requires

  1. Eligible accounts

    IRA, SEP, Keogh and 401(k)-type accounts – vested funds only.

  2. Uses

    Down payment, closing costs and reserves.

  3. Lender checks

    Ownership, vesting, and that withdrawals are allowed regardless of employment.

  4. Invested funds

    Stocks, bonds and mutual fund rules apply to value and proof of receipt.

  5. Reserves only

    No withdrawal required.

What the TC can do

  • If the buyer plans to use retirement money, ask the lender what proof it needs and by when.
  • Remind the buyer that withdrawals and plan loans take days to weeks – start early.
  • Suggest the buyer ask a tax professional about taxes and penalties before withdrawing.

Questions buyers ask

Can I use my 401(k) for a down payment?

Yes, on a Fannie Mae loan, vested 401(k) funds can pay the down payment, closing costs and reserves; the lender verifies ownership, vesting and that withdrawals are allowed regardless of employment (Selling Guide B3-4.3-03).

Do I have to withdraw my 401(k) to count it as reserves?

No. When retirement funds are used for reserves, Fannie Mae does not require them to be withdrawn.

Will I pay taxes on a 401(k) withdrawal for a house?

That depends on tax rules outside the mortgage guidelines – ask a tax professional before withdrawing.

Related guides

When the lender asks for retirement statements or proof of a withdrawal, request them from the buyer in ClosingCode with an upload link – and see when they arrive.

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Source: Fannie Mae Selling Guide B3-4.3-03, Retirement Accounts (06/30/2015), selling-guide.fanniemae.com, read October 26, 2026.

General information about Fannie Mae conventional loans, not financial or tax advice. ClosingCode is software; it is not a lender, tax preparer or financial adviser. This guide is not a substitute for the advice or services of an attorney.