I just love the answers here. Again, I have no idea where these agents come up with this stuff but none of it is true. With the exception of Home path financing which require 10% down for investment properties, conventional, conforming loans will require a 20% down payment for an investment property.
As for borrowing from your 401K, it is perfectly acceptable and does not even count against your debt ratios.
See Fannie Mae selling Guide: Page 424
Secured Borrowed Funds
Borrowers can borrow against an asset they own, such as a 401(k) account or real estate,
according to the requirements of B3-6-05, Monthly Debt Obligations. The amount of the secured loan should be entered as Secured Borrowed Funds in Section VI A. The secured loan amount should be subtracted from the market value of the actual asset, and the net asset value should be entered in the appropriate field in Section VI A.
For example, if the borrower has a vested value, less taxes and penalties, of $30,000 in a 401(k) account and borrows $10,000 against the 401(k), enter $10,000 as secured borrowed funds and enter $20,000 as retirement funds. Loans that are secured against a liquid asset owned by the borrower (such as a 401(k) or
mutual fund) do not have to be entered as liabilities in Section VI Liabilities if the appropriate
documentation is provided.