There are a lot ofconsiderations when embarking on process of buying a home, not the least of which being how to pay for it. If you are trying to pull together a downpayment, you may wonder if you should cash in some of your 401k money, but can you do that?
Here are a few thoughts from RRG’s Portland Real Estate agent, Heather Robbins, then read on for more info
So…
Can you withdraw from your 401k to buy a home?
Short answer: Yes, you can
Long answer: Yes, you can, and there are penalties and costs associated with it. You’ll be looking at taxes and additional penalties–the exact amounts will depend on your age, how much you withdraw, and whether you make a 401k withdrawal or a 401k loan. Either way, you’ll need to consider the impact it will have on your retirement savings.
If you are looking at borrowing money, here are some alternatives to using 401k money for a downpayment:
FHA loans: allow as little as 3.5% down and only require a 580 credit score
Conventional 97 loans: start at 3% down and require a 620+ credit score
VA loans: available to veterans and service members with 0% down
USDA loans: can be used in certain rural areas with 0% down
Fannie Mae HomeReady and Freddie Mac Home Possible loans: only require 3% down and have flexible requirements for first-time home buyers who have little cash
The Mortgage Reports
As always, we recommend talking to a financial advisor–we can help you get connected with one, if needed.
Contact us and we can strategize on home purchase, other ways to save for your costs, etc.
