@tianapb725 wrote:Thanks everyone for your opinions and advice!
I understand the tax penalties if I were to withdraw from my 401K, but that wasn't really the question. The question was posed as if an underwriter would not approve an application if this had been done in the process. I have 32K in my 401K and I'm 28. The withdrawn amount would be about 10K to pay off all debt so I could essentially start a clean slate and start saving for a down payment without having to worrk about make any debt payments.
Like I said, this isn't something that I've done and am going to do without putting some serious thought into it. A home purchase is at least 1 year away, so I'm just lining up my ducks
I don't think it matters. It's not counted in your DTI. If there is a reserve requirement, and you plan to use your 401K for reserves, it obviously reduces what you have available to you for reserves. Are you allowed to take multiple loans from your 401K, or do you have to pay back the first one before you can take another? I don't know how that works, but if you can't take multiple loans, I could imagine that being an issue in terms of trying to use the remaining amount for reserves. That last part is just conjecture, no specific knowledge on that front, but it would be something I would want to research if I were you.
Starting Score: ~500 (12/01/2008)
@Anonymous wrote:Again, the "20% interest rate" was a metiphor. I was refering to the the tax bracket I'm in. If I have to pay back money post tax then I will have to pay taxes on it twice, regardless. Over rated? It is what it is.
I know. It's a bad metaphor. The only thing you are paying taxes on twice is the interest.