Using your 401(k) to purchase property is generally allowed but not necessarily recommended. Here's why: A 401(k) loan is not taxed and won't affect your credit, but it could negatively affect your retirement savings. A 401(k) withdrawal, on the other hand, comes with a 10% penalty plus income tax from the IRS. We advise against this course.
You can use your 401(k) money to buy a home, but this is not the preferred route. Most first-time homebuyers are at an age where they should be investing in their retirement, not reducing its amount. Plus, If you're unable to repay the loan, it may be treated as a taxable distribution, subject to penalties.
If you put down less than 20% on your down payment for a conventional loan, you will likely pay PMI. To avoid this expense, many consider using their retirement to reach the 20% threshold. However, considering the long-term costs and benefits, using your retirement to avoid PMI isn't too attractive after all.
If you're having trouble coming up with a down payment, remember that there are loan programs that require as little as 3.5% down. Explore our loan programs on our website and contact us for more info.
Interest Rates Have Increased
Borrowers May Not Qualify
Due to DTI Calculation
Time To Consider
NO RATIO PROGRAM
No DTI calculation
No Income on Application
No Employment on Application
No Tax Returns
No W2s
No 1099
Only Required to Have
as low as 20% Down Payment
80% LTV = 720+ FICO - 12 Months Reserves
75% LTV = 680-719 FICO - 9 Months Reserves
65% LTV = 660-679 FICO - 9 Months Reserves
Funds for Down Payment
Closing Costs
Prepaid’s
Reserves
Primary Residence
Second Home
Purchase
Refinance
Minimum Loan $200,000