Here’s how to use your 401(k) account to fund your home purchase.

Did you know that you can use your 401(k) to buy a home? Things are so competitive out there in today’s market that we wanted to show buyers another option that they might not be aware of.

Buyers are having to take on the sellers’ expenses in this seller’s market, and not all buyers have that kind of cash available. Michael Alliman is a former CPA, tax accountant, CFO, and our team’s financial advisor. He joined us recently to talk about how you can use your 401(k) to buy a home.

“Most financial advisors don’t recommend taking the distribution.”

There are two ways you can do this. You can take a distribution of the funds you have in your account to make your down payment or you can borrow against the amounts you have vested in your 401(k). 

Michael said that most financial advisors would advise against taking the distribution because you’ll end up paying a 10% penalty off the top and anything you take out is considered taxable income. If you borrow the money, on the other hand, you can take up to $50,000 out and five years to repay it. While you do lose some traction in your retirement savings, you are paying yourself back, and you are required to pay yourself back with interest. 

If you have any questions for Michael about this home-buying option, don’t hesitate to reach out to him via phone at (832) 586-8099. 

If you have any additional real estate-related questions for us, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.