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I am trying to purchase a property that requires 25% down. The property is in my price range without issue however i do not have the 25% required for down payment (its a condo). I have reviewed numerous options, first time homebuyer, FHA etc and it appears im in a tough spot. Im curious what your suggestions would be.
Option 1 (Florida FTHB with DPA assistance)
Loan at 4%, depending on my income
DPA -I would be eligible for around $7,500 from both state and county offices ($15,000 combined) DPA is a interest free loan
Con - My girlfriend and her brother live with me and puts us well over the income limits, I spoke with a person today at the housing office and was told if they don't live with me for the 6 month range then it would be OK not to include them. Going that route we would be maintaining 2 residences for about 6 months My house payment and her and her brothers rental.
The extra prices in here (around a $900/month extra charge) make that an unlikely option
Option 2 401k withdrawls
My company does not offer a "loan against" with repayment plan. I have enough in savings + my 401K to pay the DP on the house however I would be taking a huge 35-45% penalty on my withdrawl and I cant contribute for 6 months
I'm leaning heavily on this as I would think the money lost is worst than the amount spent on the 2 separate places. The money we would be saving would make up for that and I can increase my plan input after the 6month period.
So what are your thoughts on this. Either way im taking a loss but in the long term it would not be a bad hit as the savings over rent would be realized within a year (I am also including HOA, utilities, insurance in that formula).
If you need more info to provide me help with my issue let me know. Also im wondering if the tax benefits form a house would somewhat help with the shock from option #2 obviously not erase the large penalty.
I'm wondering if you're overestimating the penalty for withdrawal? If you haven owned a home for three years, you can pull $10k out of a retirement plan with no penalty, just pay the tax. Most people don't pay anywhere near 35% in income taxes. Perhaps talk to your tax person to get a ballpark estimate of what the withdrawal will do to your taxes.
Thanks for the insight zippy, unfortunately its a federally "allowed" thing but companies have the right to allow it or not. My company doesn't allow it. Instead I would be clearing out the 401k with no repayment and I cant contribute for 6 months. So basically ill have 0 retirement funds for that time and be unable to put anything in again for 6 months. I guess the penalty % is all based on your tax bracket which I have no idea what it is.
If you don't have the downpayment, and presumably any other savings, it's not in your price range.
Sorry Trapper, I think you misread (sorry if I didn't word it correctly), I have enough in my 401k or I may be able ot take advantage of state and county assistance programs. Either way I will ahve what is needed to get the downpayment, my dilemma is determining which one to use as both have drawbacks as my company doesnt allow "401k loans".
Sorry Trapper, I think you misread (sorry if I didn't word it correctly), I have enough in my 401k or I may be able ot take advantage of state and county assistance programs. Either way I will ahve what is needed to get the downpayment, my dilemma is determining which one to use as both have drawbacks as my company doesnt allow "401k loans".
Your 401k is a retirement account. You don't have the cash for the downpayment. And no reserve.
Thanks for the insight zippy, unfortunately its a federally "allowed" thing but companies have the right to allow it or not. My company doesn't allow it. Instead I would be clearing out the 401k with no repayment and I cant contribute for 6 months. So basically ill have 0 retirement funds for that time and be unable to put anything in again for 6 months. I guess the penalty % is all based on your tax bracket which I have no idea what it is.
Even if your employer "doesn't allow" anything but a complete withdrawal, the first $10k is excluded from the penalty by the irs if you're a first time buyer (which to the irs, just means you haven't owned a home for three years). Your employer doesn't get a say in the matter.
Definitely talk to a tax guy.
The penalty is 10% on anything over $10k. which might not be as bad as you think.
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