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anyone familiar with using 401K for house downpayment?


humdinger
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I've read that the gov will allow you to use 401K money for a home. I've looked thru the IRS site but can't find anything.

Are the funds treated as regular income for that year. Do I need forms to get the 401K investment co to release the funds?

Any info would be appreciated.

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Charles I don't think the mortgage company will know, willthey? I mean your 401K won't pull your report nor open a TL for your money. I know several people who have done this. This is based on the plan of your employer. Our job allows 50% loan for primary residence with a agreement of sale as proof. They will also allow you to take out a hardship but you get penalized as long as it's proven you need the money or you will loose the mortgage. Just some extra papework basically. I help people with those things all the time.

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If you are really careful, you won't have a problem, but here is where it can come back at you.

Lets say that things get a little drawn out, and the lender wants to see another pay stub from you. If you have pulled it out and it shows as a loan, with payments to be made, then you are "caught". Also, many lenders want to know where the downpayment or the closing costs funds are coming from. You have to in most cases show that information, it is called "seasoning of funds".

So, yes, I have done it in the past. No, I don't like doing it, because I do my loans so that if this is the one that undergoes a QA, I won't have a problem. It has not happened to me, but my friends say that those events are interesting, when they start asking a lot of questions that there are no really good answers to.

Charles

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Good call. I never thought of the loan on the paystub! I think the best way would to take the money from your 401k and opt to send payment in via mail till approved. Can that be done, I think with our program you can hget a weekly bill, monthly or yearly. I opted to do weekly auto draft from pay. Payments of $23 a week for a little toy I bought years ago. It's gone now but it was nice that I paid myself the interest!

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You know, I think that would work. It would not show up anywhere as a debt/loan to be paid, as you would be paying it by mail. I would just suggest that you ask how or if it shows up on the stub. Then, put the money in the bank and 2/3 months later you have the funds "sourced"

Charles

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