CheMichone
First Time Poster
Cash: $ 0.25
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Joined: 20 Jul 2005
Location: Hammond
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| 401k for real estate |
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My husband and i are in the process of buyin gour 1st home, although were qualified for no money down we don;t have the extra monies needed for the home buying process such as inspector fees, title search fees, and other type of fees, would it be wise to bowwor from my husbands 401k (since i am currenlty unemployed) to help us meet these expenses and is there a huge penalty?
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Wed Jul 20, 2005 7:05 pm |
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sayyes
Preferred Member
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Joined: 02 Jul 2005
Location: Newport, RI
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I would strongly suggest against borrowing from a 401(k) to finance the extra expenses. If you're not paying closing costs, you probably have to come up with about $500.
Unless your mortgage payment is less than your current rent payment (which is unlikely), this may be a sign that you're getting over your head if you can't put together $500.
Remember that a house is more than a mortgage. If your rent currently includes heat, hot water, air conditioning, cable, or any other expenses, remember that these will cost you more money when you buy your house. Not to mention the cost of landscaping, heating/air conditioning a larger space, property taxes, etc.
I'm not familiar with your situation, but when you say that you're buying your first house, but cannot afford the cost of the necessary inspections, that raises a red flag.
I hope this helps. If you want to talk offline, feel free to contact me.
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Thu Jul 21, 2005 1:05 am |
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MattL
Senior Member
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Joined: 25 Jun 2005
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I completely agree with Chris. If you can't afford the relatively small fees, you aren't ready to buy a home and will be floored by the expenses you will see after you buy your home. You could end up racking up the credit card bills and deep in debt.
Save up an emergency fund and enough to cover the fees before you buy.
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Thu Jul 21, 2005 3:54 pm |
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rvirzi
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Joined: 28 Jul 2005
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| Re: 401k for real estate |
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If you borrow from your 401K, you will have to pay it back, so it doesn't help much. If you pull the money out, you have to pay your tax rate on it plus 10%. In additions, the money won't be there to grow tax free while it is not in the account. These are just a few of the reasons why you should never take from your retirement plan except for extremely dire emergencies.
quote:
Originally posted by CheMichone
My husband and i are in the process of buyin gour 1st home, although were qualified for no money down we don;t have the extra monies needed for the home buying process such as inspector fees, title search fees, and other type of fees, would it be wise to bowwor from my husbands 401k (since i am currenlty unemployed) to help us meet these expenses and is there a huge penalty?
Ray Virzi
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Thu Jul 28, 2005 8:59 pm |
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bong12187
Preferred Member
Cash: $ 24.50
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Joined: 31 Jul 2005
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| Re: 401k for real estate |
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quote:
Originally posted by CheMichone
My husband and i are in the process of buyin gour 1st home, although were qualified for no money down we don;t have the extra monies needed for the home buying process such as inspector fees, title search fees, and other type of fees, would it be wise to bowwor from my husbands 401k (since i am currenlty unemployed) to help us meet these expenses and is there a huge penalty?
How much is the house? What is the monthly pmt? What is the interest rate or rather, the APR? PMI? Escrow? What is your income to debt ratio? How many kids do you have? How many car payment do you have and how much? Will there be repairs needed to be made for the house? What is your gross income and your net income? What is your rate of return of your 401k? Have you run the # crunching and look at the different return between your 401k vs. buying a home?
The reason for all these questions is because if you do really well answering them then I will recommend for you to borrow from your 401k. I borrowed 20k to buy a rental house. I am currently paying it back to TSP but I am getting 500.00 of passive income (after everything is paid). Now do the math. 500x12=6000/20k=30% per year not to include all the phantom income. Yours is a totally different scenario and I will have to agree with everyone not to touch your 401k if you do not do well answering all the questions I raised.
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Mon Aug 01, 2005 6:15 pm |
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