rightYou've finally found the home of your dreams. There's just one thing standing between you and your new house: The down payment. A large part of what we do as your trusted advisor and best mortgage lender is sourcing the money for your down payment.

Nowadays, many of our home buyers today opt to use funds from their employer’s 401(K) program to come up with the down payment on a house. Ordinarily, you can't take money from your 401(K) plan unless you retire, leave the company or become disabled, but many company plans permit certain “hardship withdrawals” when there is an immediate and heavy financial need, including the purchase of the employee's principal residence.

When obtaining mortgage financing, you may be to borrow against your 401(K) – often as much as 50 percent of your account balance. You pay interest on the loan, but the interest goes back into your account. The money you receive is not taxable as long it is paid back and plans can give you anywhere from five to 30 years to pay back your loan.

Fannie Mae and Freddie Mac treat this source of funds differently. Fannie Mae will count the money you borrowed from your 401(K) as an additional debt that will go along with your car payments, student loans and credit cards. While it may seem unfair since you are borrowing your own money, most lenders view it as a payment obligation that affects your debt-to-income ratio in qualifying for a home loan. Freddie mac will simply deduct the amount borrowed from the vested amount of the 401K

 

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