Should you use 401k funds to purchase a home? 

If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.

Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.

I will be happy getting assistance and glad to get the help of one, but just how can one spot a reputable one?

There are advisors in cities around you but I needed services of one who can guide me irrespective of location. Natalie Lynn Fisk comes highly recommended especially in times like this. I am hedging and haven't lost much to the recession. I found her in 2020 when the market was at an all time low. Look her up and thank me later.

I am on her site doing my due diligence. She seems proficient. I wrote her an email and scheduled a phone call. Thanks for sharing

Wahoo! that's great Erica. Best of luck to you. If you need any help just reach out to us at team@azmortgagebrothers.com

Also isn’t there a penalty and taxes for taking that money out? Or was this example on a loan from the 401k only.

Must also consider not only are you continuing to contribute but it's a loan so arent you also paying yourself back for that loan ? They also don't mention property taxes.

Would not the homeowner continue to make same contributions after the initial loan for the home? Seems like they would balance each other out. So the analysis was focused on just the initial investment

@@glowchet did they not say that your payments will be the same as rental?. Your rental would have gone up in rent same as property tax. So it is included in their math

Awesome. Glad we could help ☺️

Any time! 😀

In situations like this where a borrower has the option to leverage significant assets on a down payment, we generally recommend applying closer to the minimum amount required. Especially since the source is a 401K.

thought it was 10k if you was gonna purchase a home

@@BronzeGirl no. it depends on you really. They are telling me to get a state benefit of 10k i have to have less than 10 k in my savings account.

@@devilboykillz I see I looked on Empower website says it has to be IRA hardship with out penalty or I would have to do a withdrawal or loan with 401k. I don’t currently have IRA 🥹

Good question. For example, If you borrow $50,000 (which is the max allowed by the rules) against your 401K then $50,000 of your investments will be liquidated in your 401K. So, you are correct, someone who borrows $50,000 from their 401K will not see any 'gain' or 'loss' that would have occurred if that amount was invested in the 401K. Any interest charged on the outstanding loan balance is repaid by the participant into the participant's own 401(k) account, so technically, this also is a transfer from one of your pockets to another, not a borrowing expense or loss. The 401K loan should not be done lightly, and it should always be done with the mindset of paying it off as soon as possible. Ideally homeownership and retirement investing are both long-term endeavors. Taking the 401K loan will diminish your stock market exposure but it will also increase your exposure to real estate appreciation. In the long run both markets (stock and real estate) should see appreciation and whatever gain that was potentially lost in the stock market would likely be offset by the real estate appreciation. We believe that homeownership is important to the long-term quality of life of a person and when it is done responsibly, a 401K loan can be a good option. Disclaimer, this is not financial advice, it is for informational purposes only. We recommend all homeowners seek financial consultation from a licensed professional.

Hello Alex, this is a really good question and it is hard one to answer without knowing all of your details. In general, taking funds from your 401K (as a loan) can be a good option if you intend to hold the property for a minimum of 5 years. The reason why we say that is because we don't want to advise taking funds from a 401K to do anything with a short term time horizon. Might be a good idea to consult with a financial advisor as well on this. Disclaimer, this is for information purposes only and not financial advise.

Hi Alex, what state are you purchasing in?

I think it's because they are talking about taking a loan out from 401k as opposed to a withdrawal.

Agree 100%. No one can predict the future. Very bad advice.l

Yeah, the average S&P500 Index fund has gone up 10.7% annually over the past 10 years. Over the past 30 years, that number crashes down to 9.89%. What a horrible example they used. 🙄

I believe in this assumption that the property tax + PMI is rolled into the "same" monthly cost for your mortgage vs your monthly rent.

@@JavierG26868 - They are doing an "all in" calculation to include property taxes, which is indirectly in the rent but not paid directly by the tenant.

Hi Dee. Regarding your question, quitting a job is no problem as long as the borrower did not intentionally withhold important information from the bank. For example, if a borrower knew he was going to quit his job the day after his home closed and the bank finds out, their could be an issue if the bank feels like the borrower was lying or withholding that info. Let me know if that makes sense.

@@TheMortgageBrothersTeam VERY HEPFUL I live

Max 401k loan is $50k :)

Be sure to differentiate between a loan and a distribution - in many/most cases, a 401(k) can be completely distributed. Perhaps you want to make a large down payment and withdraw $250,000 from your IRA or 401(k) - OK, just pay your taxes...

Hello @agemar that is a really good question and needs to be discussed at a deeper level to ensure it makes good financial sense for your family. We would be happy to discuss this with you. Please feel free to email us at team@azmortgagebrothers.com