Buying Property With Your 401(k): Your Questions Answered

Buying Property With Your 401(k): Your Questions Answered

Is it possible to use your 401(k) to buy a home?

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.

Should you use a 401(k) as a first-time homebuyer?

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.

Should I use 401(k) funds to avoid PMI?

If you put down less than 20% on your down payment for a conventional loan, you will likely pay PMI. Wanting 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.

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