So, You’re Thinking About Raiding Your 401(k) to Buy a Home?

Ah, the white picket dream! But, before you make yourself a cup of tea in your brand-new kitchen, there’s usually a small matter of coming up with a down payment. Picture this: you need at least 3.5% down if you’re opting for a Federal Housing Administration loan, and typically, lenders expect a minimum of 5%. And if your down payment is less than 20%, wave hello to private mortgage insurance (PMI), and kiss goodbye to some of your monthly paycheck.

With the median U.S. home price hanging around $431,000 in Q3 2023, the little matter of coming up with a down payment can feel Alexa’s laughing at you when you ask her to crunch the numbers. But, hey! What about your 401(k)? It’s filled with your hard-earned cash, right? Well, that’s one option, but you should tread carefully; dipping into your retirement savings can be a slippery slope.

Let’s explore this further, shall we?

To 401(k) or not to 401(k), that is the question

Thinking about using your 401(k) for a down payment? You’ve got a couple of cards to play: whip out a loan against it, or take an early withdrawal. Hold up! Don’t rush. Let’s explore these options and what they might mean for you.

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