Your 401k/Roth IRA (subtracting early withdrawal penalty) amortized over the loan period literally do count when considering qualifying income for a conventional mortgage. This is not a taxable event. You do not actually have to make distributions. It's just standard procedure that it counts when determining whether you can pay the loan.

Incredibly terrible example because you are allowed to borrow money against a 401k, up to $50000 with no penalties as long as you pay yourself back at whatever schedule you have determined for yourself