Life Insurance Loan affecting DTI

[Chris Fritz-Grice]

Hey everyone! 

Just bought my first property in May and looking to get into the next one soon and my question is: If I have my money in a Whole Life insurance policy and borrow against that for a down payment would that loan go against my overall DTI, in other words hurt chances of securing bank financing?

The concept of borrowing against your own Cash Value seems like borrowing from yourself so just curious how a mortgage lender would view these funds compared to say taking your downpayment from a traditional savings account. 

Thank you in advance!

P.S. I don’t yet have an insurance policy but after reading and watching a lot of content on the subject I just need clarification because it seems like having your money grow in multiple places is the way to go!

[Mike S.]

Quote from @Chris Fritz-Grice:

@John Perrings thanks for your response! So in theory I should be able to borrow do from my insurance policy and since it’s using the cash value as collateral and has no terms (if I understand it right, if you never pay back the loan it comes from the death benefit ultimately) then a mortgage lender shouldn’t count it as debt. 

However, just be aware of the seasoning requirement of your down payment for your lender. You may have to take the life insurance loan one month in advance and let sit the money in your bank account to satisfy the lender.