401(k) for down payment?

[Anonymous]

Has anyone done this for first time home purchase? We don't have the savings required for a down payment otherwise and with rates the way they are would love to buy now. How did it work? Were you currently employed with the company or was it a previous 401(k)? Any help is appreciated!

[Anonymous]

I don't advise you doing that.

If you get laid off/terminated/quit, you need to pay it back within 90 days or it's an early withdrawal.

I think you hit the nail on the head - You don't have enough savings for a down payment. That likely is a sign you aren't ready to buy.

Eliminate your debts, have an emergency fund, and save for your down payment, otherwise you're taking on a lot more risk (ie. people in 2008) and eventually Murphy's law will hit.

[Anonymous]

Anonymous wrote:I don't advise you doing that.

If you get laid off/terminated/quit, you need to pay it back within 90 days or it's an early withdrawal.

I think you hit the nail on the head - You don't have enough savings for a down payment. That likely is a sign you aren't ready to buy.

Eliminate your debts, have an emergency fund, and save for your down payment, otherwise you're taking on a lot more risk (ie. people in 2008) and eventually Murphy's law will hit.

I guess this is where we made a mistake. We have close to $100,000 in our 401(k) because we were told we could use it for first time home purchase and we didn't 'research' it the way we should have. I thought we could withdraw it without penalty and am now just learning it's a loan on a few 401(k)'s from previous employers- we haven't consolidated them since they are doing well and didn't want to rock the boat after having a few rocky years.

[Anonymous]

Any financial advice column/book/person would tell you that borrowing from your 401(k) is a horrible idea and shouldn't be done if there is any possible way of avoiding it!

[Anonymous]

Nah, it's not that bad of an idea, but you need to be comfortable with the risks involved. The biggest is that you lose your job and must pay the entire loan back quickly.

[Anonymous]

Well, you wouldn't be buying a house if you anticipated losing a job, and if you lost a job unexpectedly after buying a house you'd probably sell the house quickly.

[Anonymous]

do not do it
not worth it
save for retirement
save for a downpayment

[Anonymous]

I did it , best decision ever and my home appreciated alot more than I withdrew. Make sure you calculate the penalty and our accountant was able to maximize itdeductions to offset it.

[Anonymous]

Anonymous wrote:I did it , best decision ever and my home appreciated alot more than I withdrew. Make sure you calculate the penalty and our accountant was able to maximize itdeductions to offset it.

+1. We went FHA and bought well under what we were approved for, so it was a small loan anyway. Will likely make about $40K or more after closing costs when we sell, which will enable us to buy the home we really want AND pay back the remainder of the 401K loan. My employer contributes EXTREMELY generously, so I'm still ahead anyway. I think it depends on your situation.

[Anonymous]

PP, don't listen to the knee-jerk naysayers. Run the numbers and see if it's right for you.

[Anonymous]

Anonymous wrote:Well, you wouldn't be buying a house if you anticipated losing a job, and if you lost a job unexpectedly after buying a house you'd probably sell the house quickly.

Do you know what will happen to you tomorrow? You might get fire tomorrow or dead. Can you sell a house like you sell stock or bond?

[Anonymous]

I thought about it, with the Feds the most I could withdraw was $50,000. Ended up not doing it. Just run the numbers, as a PP said.