Frequent Contributor
payingoffdebt001
Posts: 406
Registered: ‎04-15-2011
Can I use my 401k to help me purchase my dream home?

OMG the house of my dreams just went back on the market.  Too bad I dont feel I qualify yet.  IS THERE a possiblity??

I could borrow from my 401k for home loan - currently have 30,000 not sure how much I can borrow. But my problem is that my scores dropped because I charged up on some cards and cant get them down until the end of year.  Unless I use some of my 401k money to help with this? 

 

I am in love with the house..is it a sign by it coming back up avaiable?  Should I give it a shot?  The house is listed for 109,000.  I earn in the 60s.  I do have two derogotories on my report that are from Nov 2009 (Auto repo) and 2007 (rental lease).  Too largef or me to pay off - but I'd be wiling to get into a payment plan if needed.

 

Can I do something with my 401k money to help??  I heard there is a different way of taking money out for a home loan compared to a regurlar loan so I dont know how this effects my DTI in the end.

Contributor
seemund
Posts: 90
Registered: ‎03-29-2010
Re: Can I use my 401k to help me purchase my dream home?

You could do a withdrawal for certain reasons, including purchase of first home.

This can usually be done using your account's website. 

 

Just remember: this is a withdrawal, not a loan. The money will not be repaid, and you will be depleting your retirement funds.

 


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Regular Contributor
Cloudlb
Posts: 227
Registered: ‎08-05-2010
Re: Can I use my 401k to help me purchase my dream home?

it depends on your plan -- review your plan documents and ask your plan administrator. 

 

With mine, I cannot withdraw unless 1) there's a hardship (which is really not the case here; and 2) I take a loan from it first.  Even then, there would be a tax penalty.  I can (and may) take a loan from it, but the catch is that if I were to change jobs, I might have to pay the loan back in full.  Very risky. 

 

Yours may be different.  Some Roth 401ks, for example, will allow  you to withdraw an amount for a house downpayment without penalty.  But again, you need to check your plan documentation. 

Frequent Contributor
payingoffdebt001
Posts: 406
Registered: ‎04-15-2011
Re: Can I use my 401k to help me purchase my dream home?

Thanks for the replies, I've though it through and will wait it out.  My plan does alllow for mortgage withdrawal and also loans but I think I'm going to stick wih my original plan of waiting until next year.  As I thought more of that house I'm in love with - it may not be what is best for us.   I get a large commision check in April and can also use my income tax return for the down payment and paying down cards to qualify.  Then at least I leave my 401k alone. Sorry, just got excited when I saw that house I've been watching come back on the market after it went into pending.  I think I'm staying off the home sale website until I'm ready so I dont jump the gun again.

Regular Contributor
Cloudlb
Posts: 227
Registered: ‎08-05-2010
Re: Can I use my 401k to help me purchase my dream home?

good for you.  I was going to mention the "falling in love with a house" thing, but looks like your head prevailed over your heart.

New Member
Pool_Shark
Posts: 1
Registered: ‎09-30-2012
Re: Can I use my 401k to help me purchase my dream home?

From the research I've done I do not believe you can withdraw from your 401k without significant tax penalties.  The first time homebuyers exemption is for IRAs not the 401k program.  You most likely can borrow against your 401k without penalty.

Regular Contributor
jtc411
Posts: 169
Registered: ‎03-29-2012
Re: Can I use my 401k to help me purchase my dream home?

Pool_Shark wrote:

From the research I've done I do not believe you can withdraw from your 401k without significant tax penalties.  The first time homebuyers exemption is for IRAs not the 401k program.  You most likely can borrow against your 401k without penalty.


Wrong, all hardship withdrawls approved by your benefits management will be straight taxed at 10%.  If you take the money out and do not use it for its purpose(when you do your taxes don't have the new address listed as your primary), you will be penalized an additional 10% and the money will be taxed accordingly to your bracket

 


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DallasLoanGuy
Posts: 6,129
Registered: ‎07-03-2007
Re: Can I use my 401k to help me purchase my dream home?

borrow the funds from the 401k

 

the payments do not figure into dti

 

this is the est course of action for most

 

 




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Regular Contributor
jtc411
Posts: 169
Registered: ‎03-29-2012
Re: Can I use my 401k to help me purchase my dream home?

DallasLoanGuy wrote:

borrow the funds from the 401k

 

the payments do not figure into dti

 

this is the est course of action for most

 

 


+1, if you have available loan amounts and can afford to pay it back it hurts a heck of a lot less since you'll be paying it back with interest

 


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Established Contributor
gbishere
Posts: 736
Registered: ‎07-07-2010
Re: Can I use my 401k to help me purchase my dream home?

Noones even asked for your profile yet. Have you yourself calculated your front and back end ratios?

 

Also cant you do a FHA only put down 3.5 and then put some of that 30 on yoru credit cards?

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