Buying Property With Your 401(k): Your Questions Answered


Is it possible to use your 401(k) to buy a home?

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.

Should you use a 401(k) as a first-time homebuyer?

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.

Should I use 401(k) funds to avoid PMI?

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



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