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I am thinking about borrowing the down payment and closing cost from my 401K for an FHA loan. My employer deducts installments from my paycheck at prime +1% for 5 years to pay myself back for the loan. IS THE MONEY I PAYBACK THE LOAN WITH PRE OR POST TAX? If it is pre-tax then I'd be paying myself back at about 1.84% interest. If the payback money is post tax then it would be the same as approximately a %20 interest loan because I would be paying the government about 20% taxes before paying back my loan.
IF the money I borrow from my 401K gets paid back pre-tax then I would want to put 20% to 35% down on the house. If the money I borrow from my 401K is paid back post tax, I would want to borrow as absolutely little as possible even to the point of rolling as much of the closing into the loan as allowed.
My employer can't seem to tell me whether the loan is paid back pre tax or post tax and nobody else at my job seems to know either.
it's "POST" tax for sure.
still, you are paying interest to yourself.
Can't see where it would do me any good to pay myself 1.84% interest when I'm paying Uncle Sam 20% interest at the same time. Looks like a minimal down payment for sure.
I had only hoped that since my 401K contirutions were original pre tax contributions, and that I'm paying these same funds back to myself would be pre-tax contributions. It's not a huge deal but would I rather pay 0% or 20% if I had a chose? Anyway, I'm only borrowing 4 to 6K. I am not borrow anything.
I still don't know if this house will be expensive enough for me to find enough deductions to itemize. That ramains to be seen. Though near new construction and in a gated community, this is still the new Las Vegas market; a $52,000 townhouse.
I've had an internet yard sale going since I made an offer on the house. I had no idea how much "good" junk I had laying around here. I've raised about 4K for down and closing but ended up paying down credit cards for utl. Actually, I've never been in better shape to buy a new house. There won't be much suffering at all after buying this house.....until RC Willey furnitures Memorial Day sale anyway.
StrateUp - I've heard of people having issues verifying the deposits that were from cash sales on Craiglist, so be careful about that. You may want to make sure you have copies of your Craigslist postings or just make sure that when you apply, all of the cash deposits from the Craigslist sales aren't on your last 2 bank statements. I'm sure others can explain better, but I just wanted to throw that out there!
@MBOhio2 wrote:StrateUp - I've heard of people having issues verifying the deposits that were from cash sales on Craiglist, so be careful about that. You may want to make sure you have copies of your Craigslist postings or just make sure that when you apply, all of the cash deposits from the Craigslist sales aren't on your last 2 bank statements. I'm sure others can explain better, but I just wanted to throw that out there!
you can easily ask a relative to sign a "gift" letter, just a paper process for the UW.
MBOhio2, none of the money I raised is going towards the house. I ended up paying off a few balances of credit cards instead. Still though, I have documented every less-than-usual deposit just the same. My numbers are good. I talked face-to-face with Wells Fargo today. She said she didn't care about my internet yard sale. The other numbers would suffice. Not a boast; you wouldn't believe where I came from to get here.