Real estate agents normally do not give advice regarding where your down payment/funds to close on the home needs to come from (which is really the only purpose a 401k loan would have in relation to buying a home), so I suspect the real estate agent was saying you needed a FHA 203k loan because the particular property you were looking at needed some repairs in order for a lender to want to lend on it.
The FHA 203k loan is a rehab loan, where the loan amount is based on the purchase price + the cost of the rehab/improvements that are to be done on the property. You can read more about it in tremendous detail at:
http://portal.hud.gov/hudportal/HUD?src=/program_offices/hou (click on the first link called "Rehab a Home W/Hud's 203k Rehab Program" to get a very thorough overview of the loan program).
Do you think that is what your real estate agent meant/said instead of a 401k loan?
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If, on the off chance, your agent actually suggested that you tap into your 401(k) in order to buy a house, consider the possibility of finding a new agent. That'd be horrible advice in 999 cases of out 1,000.
FHA wants to make sure they lend you money on a home that is worth lending money on-- and if it needs significant repairs, they want you to hire a contractor to make the repairs immediately so that they are loaning money on a repaired home. So, based on your loan amount of $105,000 -- and your purchase price of 90,100 -- that leaves $14,900 for repairs -- assuming the seller will also pay for your closing costs. As long as the home needs $14,900 or less for repairs you can afford the home.
The offer will be $105,000 with $14,900 to be given back to you at closin
g -- to be written as a check to your contractor -- for the repairs. This will NET THE SELLER $90,100-- their asking price.
Now, you can always offer LESS than $90,100 and your REALTOR can help you know what to offer to the seller. Every $1 can be added to the amount you use to make repairs.
I recently had a client purchase a property for about $130,000 with an additional $140,000 for repairs. His loan was for $270,000. And he was able to get an appraisal after the home repairs were finished and it was over $350,000!