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I'm in the process of buying my first home and I've gotten lots of advice that has been unclear and hard to work with. One of the clearer pieces of advice I've gotten is to not make big financial moves between being approved for a mortgage and closing on a house. Big changes to finances can (as I've been told, at least) negatively affect, or even blow up, an already-approved mortgage loan before closing.

That makes sense to me, but I have not been able to get much detail about what makes a financial decision big enough to be a problem, or what I can do during this time. I'm not looking to spend any money, but would like to know my options to access cash if I need it (buying the house is taking up most of my liquidity, which makes me anxious). I am interested in things like:

  • Can I sell stocks or mutual fund shares?
  • Can I take a loan from my 401(k)?

Can I do the above prior to closing, or are they likely to cause problems with my mortgage loan?

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Can I take a loan from my 401(k)?

That means that you have a new obligation on your paycheck. This makes the lender nervous.

Unless you are using the 401k funds for the down payment have have already told the lender this is the plan you should avoid this until you have settled on the house. I am not commenting on the advisability of 401(k) loans.

Can I sell stocks or mutual fund shares?

Generally yes. If the shares were in a taxable account you now have a tax obligation, but you also have a source of money. If it is in a retirement fund there is no tax obligation unless you are also pulling the funds completely out of the account.

In some cases the selling of shares was to be the source of the down payment, and they are expecting this.

Other thing you wouldn't want to do:

  • Buy a car with or without a loan. I had a buyer do this, and now didn't have enough for the down payment.
  • Apply for any loan, or credit card.
  • Make a big deposit into the account. The lender wonders if this is a gift or a loan from a friend/relative. A gift is OK, a loan makes them recalculate your ability to pay.
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  • And selling shares that have declined can give you cash plus a tax deduction or an offset against capital gains. And, if you wait long enough, you can buy them back again....
    – Paul
    Commented Oct 14, 2020 at 0:53

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