Did You know that Fannie Mae differentiates certain borrowed assets types for a down payment and closing costs?
While borrowing against a 401k is considered a secured asset and no payment is entered into the debt ratio, borrowing against a life insurance policy is not.
Borrowing against a life insurance policy’s cash or surrender value is considered acceptable IF there are any penalties for failure to back the loan are limited to the surrender of the policy then no payment is included in the debt ratio.
If there are additional obligations for pulling the cash out of the policy then a payment is included in the debt ratio OR the amount borrowed can be deducted from the reserves.
If you need more explanation on the above said, don’t hesitate to contact our loan sales department to have your questions answered at no cost.