Using 401k for a down payment

18 Replies

Hey BP

It seem like an eternity ago I did this for my first primary home.

After a break up with the GF, the plans to buy multi family have come to a halt and I need to move out.

I'm looking mostly at co-ops and condos that need 20% down.

I'm going to borrow 50% from my 401k. The 401k people wont cut a check till we have a signed contract. Now I 've done this once before and can't remember how it worked out.

My question is, can or how can I sign a contract without handing over the full down payment? This is obviously a common thing, I don't don't remember the answer. Thx in advance

Matt

Originally posted by @Jason D. :
@Matthew Greco the contract is the offer, you pay the down payment at closing. You'll, generally, have 45 - 60 days between the two.

 Doesn't the down payment sit in the attorneys escrow between contract and closing?

@Matthew Greco What are you planning to do w Co-op and Condo?? If you’re planning to purchase as Primary it’s fine but if you’re planning to rent it out or do Airbnb you need to check w board if they allow that??

just a fyi, it's 50% OR 50k max.... which ever is less

A qualified plan may, but is not required to provide for loans. If a plan provides for loans, the plan may limit the amount that can be taken as a loan. The maximum amount that the plan can permit as a loan is (1) the greater of $10,000 or 50% of your vested account balance, or (2) $50,000, whichever is less.

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-loans

Why is your 401k company asking for a signed contract?  You can use the money for whatever you want...  Unless you are using the first time homebuyer portion?  Why don't you just get a general purpose loan?

Earnest money is significantly more in NY...10%. I recently purchased a Co-op in 2015 in Whitestone so let me know if you have any questions.

I would say go for a condo if you can but in Queens most condos are double the price of co-ops.  However if you are on this website you are probably are investing or thinking about investing int he future.  There are 2 main things I would look for in a co-op and in retrospect maybe have even bought a smaller place in a less desirable area to gain these two things:

1. Ability to borrow against your co-op (refinance, HELOC, etc.)

2. Ability to rent your co-op with minimal hassle  from the board.

 These two items will give you great flexibility in the future and will make your co-op an investment, not just  a place to live.

Thanks again everyone for the brush up in information

@fahim I'm actually looking in Manhattan (still not sure if it's the best idea) but it's super close to work. My commute right now is about an hour each way and it completely drains me.

Looking at studios and 1BR. 

The plan before breaking up with my GF was to buy multi family with her in NJ, but lift threw me a curve ball....

Originally posted by @Fahim Ahmad :

Earnest money is significantly more in NY...10%.  I recently purchased a Co-op in 2015 in Whitestone so let me know if you have any questions.

Now I remember!!!! Thank you