Using your 401(k) to purchase property is generally allowed but not necessarily recommended. Here's why: A 401(k) loan is not taxed and won't affect your credit, but it could negatively affect your retirement savings. A 401(k) withdrawal, on the other hand, comes with a 10% penalty plus income tax from the IRS. We advise against this course.
You can use your 401(k) money to buy a home, but this is not the preferred route. Most first-time homebuyers are at an age where they should be investing in their retirement, not reducing its amount. Plus, If you're unable to repay the loan, it may be treated as a taxable distribution, subject to penalties.
If you put down less than 20% on your down payment for a conventional loan, you will likely pay PMI. To avoid this expense, many consider using their retirement to reach the 20% threshold. However, considering the long-term costs and benefits, using your retirement to avoid PMI isn't too attractive after all.
If you're having trouble coming up with a down payment, remember that there are loan programs that require as little as 3.5% down. Explore our loan programs on our website and contact us for more info.
For information purposes only. This is not an offer for extension of credit or a commitment to lend. Information and/or dates are subject to change without notice. | Financing is shown for comparison only. Rates and fees are subject to change without notice. | All loans are subject to borrower's credit approval and property qualification. Additional funds for reserves may be required. | Xpert Home Lending, Inc. | NMLS# 2179191 | CORPORATE: 1100 Satellite BLVD NW, Suwanee, GA 30024 | (417) 540-4858 | Equal Housing Opportunity | www.nmlsconsumeraccess.org
