“Before you decide to dip into your retirement to buy a home, be sure to consider all possible alternatives and talk with a financial expert.”
Are you dreaming of buying your own home and wondering about how you’ll save for a down payment? You’re not alone. Some people think about tapping into their 401(k) savings to make it happen. But before you decide to dip into your retirement to buy a home, be sure to consider all possible alternatives and talk with a financial expert. Here’s why.
The Numbers May Make It Tempting
The data shows many Americans have saved a considerable amount for retirement (see chart below):
It can be really tempting when you have a lot of money saved up in your 401(k) and you see your dream home on the horizon. But remember, dipping into your retirement savings for a home could cost you a penalty and affect your finances later on. That’s why it’s important to explore all your options when it comes to saving for a down payment and buying a home. As Experian says:
“It’s possible to use funds from your 401(k) to buy a house, but whether you should depends on several factors, including taxes and penalties, how much you’ve already saved and your unique financial circumstances.”
Alternative Ways To Buy a Home
Using your 401(k) is one way to finance a home, but it’s not the only option. Before you decide, consider a couple of other methods, courtesy of Experian:
- FHA Loan: FHA loans allow qualified buyers to put down as little as 3.5% of the home’s price, depending on their credit scores.
- Down Payment Assistance Programs: There are many national and local programs that can help first-time and repeat homebuyers come up with the necessary down payment.
Above All Else, Have a Plan
No matter what route you take to purchase a home, be sure to talk with a financial expert before you do anything. Working with a team of experts to develop a concrete plan prior to starting your journey to homeownership is the key to success. Kelly Palmer, Founder of The Wealthy Parent, says:
“I have seen parents pausing contributions to their retirement plans in favor of affording a larger home often with the hope they can refinance in the future… As long as there is a tangible plan in place to get back to saving for their retirement goals, I encourage families to consider all their options.”
Bottom Line
If you’re still thinking about using your 401(k)-retirement savings for a home down payment, consider all your options and work with a financial professional before you make any decisions.
To view original article, visit Keeping Current Matters.
The Truths Young Homebuyers Need To Hear
Here are three key concepts about homeownership you should understand before you start your home search.
Home Builders Ramp Up Construction Based on Demand
If you’re having a hard time finding a home to buy, it may be time to talk to your trusted real estate advisor about a newly built home.
Are We in a Housing Bubble? Experts Say No.
The current climb in house prices reflects strong demand amid tight supply, helped along by record-low interest rates.
What Do Experts See on the Horizon for the Second Half of the Year?
As we look at the forecast for prices, interest rates, inventory, and home sales, experts remain optimistic!
Save Time and Effort by Selling with an Agent
Before you decide to sell your house yourself, let’s discuss your options so we can make sure you get the most out of the sale.
Demand for Vacation Homes Is Still Strong
There is still high demand for second getaway homes in 2021 even as the pandemic winds down.