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Regular Contributor
Beasley12
Posts: 136
Registered: ‎06-04-2012

Using 403b for down payment

I have heard many times that people use money from 403b/401k for down payment but here is my question.....will it matter if I darn near deplete my 403b to do it? I am talking about taking a loan for the max and then taking a hardship withdrawal for the rest. I am not worried about tax implications so just know that. I am just wondering if this will look bad to underwriting. I am saving now but it will help me to buy my home sooner if I do what is planned. Waiting is not an option unless what I plan to do will cause me not to get the loan. I plan on going through FHA.
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Established Contributor
foofighter74
Posts: 828
Registered: ‎12-09-2012

Re: Using 403b for down payment

[ Edited ]

I don't think underwriters care whether you have money saved in 401k or 403b for retirement, they care whether you can meet the out of pockets costs to obtain the loan, and make your mortgage payments.  I don't think what you propose would hurt you with an FHA loan. But that's just my guess. 

Valued Contributor
JM-AM
Posts: 3,303
Registered: ‎06-09-2010

Re: Using 403b for down payment

You should be fine as long as everything qualifies.
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Super Contributor
DallasLoanGuy
Posts: 6,092
Registered: ‎07-03-2007

Re: Using 403b for down payment


Beasley12 wrote:
I have heard many times that people use money from 403b/401k for down payment but here is my question.....will it matter if I darn near deplete my 403b to do it? I am talking about taking a loan for the max and then taking a hardship withdrawal for the rest. I am not worried about tax implications so just know that. I am just wondering if this will look bad to underwriting. i have never had a problem with people taking out a certain amount. max or not. it is your money to do with as you please.I am saving now but it will help me to buy my home sooner if I do what is planned. Waiting is not an option unless what I plan to do will cause me not to get the loan. I plan on going through FHA.

 




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Super Contributor
DallasLoanGuy
Posts: 6,092
Registered: ‎07-03-2007

Re: Using 403b for down payment

make sure you can actually borrow from it.

i have seen 403b's that did not allow distributions and loans.

 

 




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Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012

Re: Using 403b for down payment

If you can take out a loan on your 403b, I would try for a 20 year residential loan. You will need to send them a signed contract along with your promissory note and it can take 3-4 weeks to get your check but your weekly payments will be much lower and you can save up the full amount owed sooner than 20 years and repay it back sooner. I would minimize new debt. And in fact, this is exactly what I did. The loan costs me $7 per week from my paycheck versus $20 per week. Doesn't seem like a lot but when added up to a month's worth of payments, it is a big difference.
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Established Member
brownj12
Posts: 19
Registered: ‎02-25-2013

Re: Using 403b for down payment

Looking at your other posts I think you will have a problem getting that money out of your account. If you take the max loan, typically the lower of your total vested amount or 50% of your balance (or $50k but per your other post that isn't applicable here).

 

With all 3 of the 401k Plans I have had, you could not take a withdrawal if it would drop your total account balance below 2x your outstanding loan balance. I don't know that this is anything other than a plan policy but I am not aware of any plans that would allow it.

 

Obviously YMMV but I would call your plan administrator before deciding on this course of action. I would hate to hear that you withdrew the max only to see that your balance for a hardship withdrawal dropped to ) $.00

 


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