There is a building company that is building a community, which takes FHA loans. I was interested in building a new home that would cost $170,000. The purchase agreement requires a 3.5% deposit, basically the minimal down payment for FHA loan, when you sign the purchase agreement. The problem I have is that I was going to take a loan out of my 401K to put the 3.5% down plus closing costs. The 401K loan requires that I have a purchase agreement that contains the purchase price, address of where the property is located, and both buyer and sellers signatures in order to get the 401K loan. I was thinking of taking a personal loan out to put the 3.5% down, sign the purchase agreement with the 3.5% deposit, submit my loan application with the purchase agreement to my employer's 401K, and then use that I receive from my 401K to immediately pay off the personal loan. Will this look bad when going through underwriting?
Have you attempted to negotiate with the seller to obtain a 10 or 14 day period to provide earnest money? This is not an unusual request and even though the current contractual language requires earnest money at contract signing I think it's a common point of negotiation and the agreement could be easily modified to accommodate this.