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Lakemoor : Real Estate Advice

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  • Home Buying1
  • Home Selling1
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Activity 3
Wed May 2, 2012
Kim Chatman asked:
Tue Jul 26, 2011
Gene answered:
Hi Ulrike: Most (but not all) 401K plans allow the plan holder to "borrow" assets from the plan to use as downpayment for a house. It is important to note that you are "borrowing" the money which means you'll have as long as 15 years to pay the loan back to your 401K. You are not "withdrawing" the money as that would constitute a taxable event which requires the plan holder to pay the federal income tax on the withdrawn amount and a penalty depending on your age at the time of withdrawal. There are, of course, significant other considerations involved with borrowing from your 401K but the short answer to your question is Yes you can borrow from your 401K...if your plan allows you to do so. As others have said, consult an attorney or financial specialist, though, before doing so. Answers on Trulia (including mine) are only personal opinions and should be understood as such.

Saying that, I want to suggest that your question should focus on SHOULD you borrow from your 401K to buy a house. The answer to this question is not as clear. There are even more considerations inovlved before answering this. If you are asking this question, it usually means you have no other assets to use as a downpayment so it's either your 401K or no house (unless you can find a program with zero down). As a former registered Investment Advisor, NYSE committee member, and financial planner with 40 years experience, my advice, based on the current economic climate and uncertainty is an unequivocal NO. Your 401K is your financial lifeline when you have no other assets to fall back on. If employment security was higher, if falling real estate prices were to stabilize, if our economy was to strengthen, then I might answer otherwise. But the current risks are too high to suggest or advise raiding your 401K for all but the most crucial and necessary expenses. Whatever you decide, Good Luck and God Bless.
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Mon Jan 25, 2010
Keith Sorem answered:
N
I heard an interesting suggestion from a very senior Realtor.
Keep calling until you find somebody nice, that is willing to help you.

Most banks do NOT want to foreclose, particularly when you demonstrate that you are once again employed and would like to stay in the home.

Just keep calling and asking....

Last resort would be a short sale, talk with a local Realtor about your situation.
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