Can I use my 401k for down payment financing?


Yes, you could. 401k can be used for down payment financing as long as your employer agrees to it. Normally, 401k can be used only if you quit, retire or have an accident, but some companies may allow withdrawal for the purchase of a home.

By law, 401k withdrawal for down payment financing is allowed, but your employer is not obligated to allow it. Also, you will have to pay penalty fees and taxes on the amount withdrawn from your 401k.

Another way to go is to borrow against your 401k - up to 50%, interest goes back to you and money is not taxable.

Risks From Using 401k for Down Payment on a House

Your funds will diminish - when you repay your 401k money, you will have lost interest and your funds will be smaller for your retirement.

If you change employer, or quit, the 401k plan will have to be replenished usually in a short time. If you don't , taxes and penalties will be imposed.

If you do borrow money against your 401k, lenders will count that into your debt-to-income ratio and it will affect your mortgage application and the loan amount to qualify.

100% financing comes as a nice alternative to 401k financing for down payment. Even though rates are more expensive, consider penalties that accompany early withdrawal from your 401k funds.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
Was this Mortgage QnA helpful?
Not at all
  • Currently 2.9/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5
Add to this Answer

Mortgage QnA is not a common forum. We have special rules:

  • Post no questions here. To ask a question, click the Ask a Question link
  • We will not publish answers that include any form of advertising
  • Add your answer only if it will contrubute to the quality of this Mortgage QnA and help future readers
If you have trouble reading the code, click on the code itself to generate a new random code. Verification Code Above:
Bookmark and share this QnA: