Using 401k source as DP

[hopeful5]

Can 401k be used for everything?  DP, closing costs, an unpaid judgement to settle before approval?  We do have some savings and are continuing to save but it will not be enough to cover all of these things. 

Can I take this money out, put in our bank account and then apply for mortgage?    Or apply and say this is my plan?

[DallasLoanGuy]

either way... apply now or wait until you move the money. no difference..... just tell the loan officer your plan

[hawkeye33]

Just don't forget that you're likely tossing 10% of that money away on penalty and you'll have to include the 401(k) money you take out on your 2009 returns (though you would have the tax credit to offset that)...

[sinceregal09]

Or, depending on how much money you need to take out, you could (if your plan allows) take out a loan on your 401k...You won't pay taxes on it as long as you don't select a long payback period such that if you left your employer, you wouldn't have paid the loan back and then typically have less than 60 days to pay back the loan before they consider it a distribution subject to taxes....

Now if you do this, your loan officer will include the estimated payment that gets taken from your payroll automatically after taxes as part of your DTI...

So you need to weigh your overall options taking into consideration - taxes, payments, DTI, etc.

Also, it is my understanding that as long as you show your distribution (if you choose not to take out a loan) is being used 100% for a home purchase, you are not subject to the 10% penalty...However, federal and state taxes are still taken out...As well as the fact that you could find yourself in a higher tax bracket later on when it's time for you to file your taxes depending on just how much you take out of the 401k because that gets added as income....Like I said...Lots of variables...

Good Luck!