Thread: How do lenders view TSP loans used for down payments?

Originally Posted by elspouse

I am thinking of buying a first home in about a year.

I understand that if I borrow from my TSP account (I am aware of all the disadvantages to this noted in the other thread aside), the payments back are usually considered by the mortgage lenders in calculating my debt-to-income ratio.

What I am not sure about is whether the proceeds of a TSP loan are considered my own money for purposes of meeting the 20% down payment requirement. I have never bought a home before and with it being a year away I have no idea which lender I might go with, so I can't get a definite answer from whoever would be my lender.

Thus, my question is whether mortgage lenders generally consider it my own money that counts towards the required down payment, or a loan that does not count towards this requirement?

Will largely depend on the lender and type of mortgage... however, as it is a loan that will affect your debt to income ratio, it may reduce how much you will qualify for.

Why use your TSP for the 20% down? You may want to get an immediate second instead...

Good luck!

Good luck.

Originally Posted by elspouse

I am thinking of buying a first home in about a year.

I understand that if I borrow from my TSP account (I am aware of all the disadvantages to this noted in the other thread aside), the payments back are usually considered by the mortgage lenders in calculating my debt-to-income ratio.

What I am not sure about is whether the proceeds of a TSP loan are considered my own money for purposes of meeting the 20% down payment requirement. I have never bought a home before and with it being a year away I have no idea which lender I might go with, so I can't get a definite answer from whoever would be my lender.

Thus, my question is whether mortgage lenders generally consider it my own money that counts towards the required down payment, or a loan that does not count towards this requirement?

TSP Loans DO NOT show up on credit reports!
They are between you and your maker.

Originally Posted by camper65

TSP Loans DO NOT show up on credit reports!
They are between you and your maker.

However, if you do not fully disclose on your loan application, there could be legal implications.

You can use the TSP loan for the 5% most lenders won't allow now. I.E. Before the current credit crisis most would give a first for 80% and a second for the remaining 20%, now most are doing an 80% first and up to a 15% second, leaving buyers to come up with 5% balance as a down payment. This can be a TSP loan. No problem doing that but you have to disclose the source of your down payment. Good luck!

Thanks for the info. Do you know if they would also count it as my money for purposes of funding a full 20% down payment in lieu of getting a second PM mortgage?

You said that you are not thinking of buying a home for a year. I don't know how much you need but I'm wondering whether taking out a general purpose loan for a year and paying yourself back the loan in a year and putting the money in an passbook account is an option?

Just throwing it out there as a possible option.

Also, can't you only take out a max loan of 50% of your TSP funds at a given time? Or did I read this wrong?

Originally Posted by Berimbauone

Also, can't you only take out a max loan of 50% of your TSP funds at a given time? Or did I read this wrong?

geeeezzzzzz1 Personally I hate paying taxes on the same money twice!
The Gov. takes enough! That's what happens with TSP Loans!

If you have to borrow from your retirement account to buy your first home - you have no business buying a home. It's that simple. Next thing you know your tapping in to your retirement for other things once one TSP loan is paid off.
Don't start a bad habit. TSP is not a piggy bank or a low interest S&L.
I'm 54 -been with the Feds -military and nonmilitary for 27 years -those years sailed by faster then I liked to think.
Save some more money-have patience. You'll own a home one day.

Originally Posted by Tempest

If you have to borrow from your retirement account to buy your first home - you have no business buying a home. It's that simple. Next thing you know your tapping in to your retirement for other things once one TSP loan is paid off.
Don't start a bad habit. TSP is not a piggy bank or a low interest S&L.
I'm 54 -been with the Feds -military and nonmilitary for 27 years -those years sailed by faster then I liked to think.
Save some more money-have patience. You'll own a home one day.

Temptest,
its that type of thinking that helps my net worth grow at a faster rate because my renters are helping me pay off my mortgages instead of them trying to buy a house for themselves. I noticed that you were in the military, if someone is in free or low cost military housing than yes, it would be smart to stay there and save up for a down payment.

While I’ll agree, its not smart to take out a TSP loan for some doodad like go on a vacation, but when it comes time to invest in a home, its fine to take out a TSP loan to help with the down payment and closing cost. Just MHO.

Originally Posted by Gilligan

Temptest,
its that type of thinking that helps my net worth grow at a faster rate because my renters are helping me pay off my mortgages instead of them trying to buy a house for themselves. I noticed that you were in the military, if someone is in free or low cost military housing than yes, it would be smart to stay there and save up for a down payment.

While I’ll agree, its not smart to take out a TSP loan for some doodad like go on a vacation, but when it comes time to invest in a home, its fine to take out a TSP loan to help with the down payment and closing cost. Just MHO.

I totally agree with Gilligan. I have borrowed from my TSP twice now to venture on a fast RE deal. I've managed to pay the first one back within 4 months and the last one is ongoing but will be paid as soon as possible. Why did I do this? Although, the setback of doing this is lessening the gains that I might have received on months that the loan is currenly in placed, the positive side of it is that I gained a property that allowed me to have a big gained in equity + passive income that raises my net worth. The property will be paying the monthly payment and I supplement it with passive income coming from other properties. After several months the TSP is paid in full and another property is added to my RE portfolio. However, I caution you in making sure that you know what you are doing prior to jumping in to an RE transaction dealing with your TSP.

Good luck to all....

Pyriel