Start Liquidating ira for home purchase

Liquidating ira for home purchase

Depending on the type of houses you’re looking at, you may need to be prepared to put down quite a pretty penny.

And even if your lender doesn’t require it, a down payment is still a good idea, as it it’ll save you tens of thousands in interest.

The amount of required down payment for other types of home loans varies, from as little as 3.5% for FHA loans to as much as 20% or greater for conventional loans.

401(k) withdrawals under hardship exemptions, such as home buying, face 10 percent penalties on such withdrawals.

Additionally, if you withdraw from your 401(k) you must pay income tax on it at tax time.

Financial experts advise that if you're going to use your 401(k) to help fund your home purchase, do so through a loan instead.

A 401(k) loan, rather than a straight withdrawal, comes with certain advantages over that withdrawal.

Believe it or not, you're able to take money out of your individual retirement account for any reason at any age -- the Internal Revenue Service just discourages it with potential taxes and penalties.

Though your Roth IRA might look like a big cash pot that you can use for a home down payment, make sure you know the drawbacks before cashing out your nest egg.

These days, it can be hard enough to pay bills, much less save enough for a down payment on a house.

The median price of a home today ranges from $138,900 to $242,500, depending on where you live [source: National Association of Realtors].

However, withdrawals from 401(k) plans are penalized on the amount withdrawn, plus the withdrawal is taxed as income.