Thinking About Using Your 401(k) To Buy a Home?

Home>>Mortgage News>> Thinking About Using Your 401(k) To Buy a Home?

Are you dreaming of buying your own home and wondering about how you’ll save for a down payment? You’re not alone. Some people think about tapping into their 401(k) savings to make it happen. But before you decide to dip into your retirement to buy a home, be sure to consider all possible alternatives and talk with a financial expert. Here’s why.

The Numbers May Make It Tempting

The data shows many Americans have saved a considerable amount for retirement (see chart below):

It can be tempting when you have a lot of money saved up in your 401(k) and you see your dream home on the horizon. But remember, dipping into your retirement savings for a home could cost you a penalty and affect your finances later on. That’s why it’s important to explore all your options when it comes to saving for a down payment and buying a home. As Experian says:

“It’s possible to use funds from your 401(k) to buy a house, but whether you should depends on several factors, including taxes and penalties, how much you’ve already saved and your unique financial circumstances.”

Alternative Ways To Buy a Home

Using your 401(k) is one way to finance a home, but it’s not the only option. Before you decide, consider a couple of other methods, courtesy of Experian:

FHA LoanFHA loans allow qualified buyers to put down as little as 3.5% of the home’s price, depending on their credit scores.

Down Payment Assistance ProgramsThere are many national and local programs that can help first-time and repeat homebuyers come up with the necessary down payment.

Above All Else, Have a Plan

No matter what route you take to purchase a home, be sure to talk with a financial expert before you do anything. Working with a team of experts to develop a concrete plan prior to starting your journey to homeownership is the key to success. Kelly Palmer, Founder of The Wealthy Parentsays:

“It’s possible to use funds from your 401(k) to buy a house, but whether you should depends on several factors, including taxes and penalties, how much you’ve already saved and your unique financial circumstances.”

Bottom Line

If you’re still thinking about using your 401(k)-retirement savings for a home down payment, consider all your options, and be sure to work with a licensed mortgage professional before you make the big decision.

Curious to see what your loan payment could look like? Try our interactive mortgage calculator below:

House Payment Calculator:

GET A RATE QUOTE

FIND A LICENSED MORTGAGE LOAN OFFICER

Conventional Loans

Refinance

FHA Loans

USDA Loans

VA Loans

Jumbo Loans

Reverse Mortgage

Homes for Heroes & First Responder Mortgages

Doctor Loans

First-Time Homebuyers

Down Payment Assistance

FHA Condo

Renovation Loans

Arizona Programs

SHANE CHRISTOPHER

Nominated for Loan Officer of the Year by ASREB in 2017 and a Mortgage Loan Officer since 2013, Shane holds more than 30 years of customer sales and service career experience, Gilbert-based Shane Christopher serves as a Mortgage Advisor with Geneva Financial. He is renowned—and respected—for a hometown attitude of service with a smile and treating clients like family.

Shane@Genevafi.com