If I contribute to a 401(k) at work, and thus have a lower W-2 income box 1 (Wages, tips, other compensation), will this hurt my debt-to-income (DTI) ratio on a mortgage application?

I wouldn't think so, but want to make sure before I start contributing since I also want to apply for a mortgage soon and want to make sure I will qualify.

Since a 401(k) deduction is voluntary, does it impact my income for DTI calculation for a mortgage?

  • 1
    I'm not qualified to say, but when I applied for my mortgage my loan officer looked at my base salary (before 401k contributions) rather than my take-home.
    – Dai
    Apr 14, 2015 at 1:46
  • Ask the loan officer whether they consider gross or net income. If gross, then it doesn't bring the debt/income ratio down.
    – wilee
    Apr 14, 2015 at 5:11

2 Answers 2


Box 1 on your w2 is gross pay minus pre-tax deductions, like 401k (traditional 401ks, not Roth), so you are correct with that assumption. With that in mind, it was my experience that the bank only looked at gross pay from my previous two months of paychecks.

Double check with a loan officer, but mortgage applications only take gross income into account so a deduction won't affect your dti.

Also, mortgage apps usually assume that you can liquidate or borrow some large percentage of your 401k to add to your cash on hand for a down payment and closing costs. Something to keep in mind.

  • 1
    But box 1 is affected by 401(k) contributions, so if box 1 is gross pay, then 401(k) would affect your gross pay.
    – WilliamKF
    Apr 14, 2015 at 17:30
  • omg, duh. you dont' get taxed on the money you put in your 401k. I'll edit to reword that. At least as far as your question is concerned, my bank just looked at gross pay from my past two months paychecks to calculate DTI.
    – Brad P.
    Apr 14, 2015 at 19:43
  • 2
    Depends on whether the 401l is traditional or Roth..
    – keshlam
    Apr 14, 2015 at 22:04

No it doesn't. Also, 401k contributions do not affect gross pay.

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