Buying a house has always been a part of the American dream. It not only adds prestige to the new owner but also some financial security. Homes for sale are now more expensive than ever, and getting enough money for a down payment can be difficult.
One way to get some of the money you need for a down payment would be to take it out of your retirement savings account. Before looking at houses for sale, here are some things you should know about using money from your retirement account to buy a house.
It Does Not Have to Be a First Home
Even though you can use money from your retirement account for a first home, it does not have to be for the first house you buy. You could have owned a house previously. The
Internal Revenue Service (IRS) says you can qualify as a first-time homebuyer if neither you nor your spouse has had homeownership for the previous two years.
Taking Out a Loan From a Standard 401(k)
Instead of making a withdrawal from your traditional 401(k), you have the option to take out a loan against it. Getting a loan is cheaper than a withdrawal—especially if you are not yet 59½. If you are not yet 59½, you must pay a 10 percent early withdrawal penalty plus taxes on the amount taken out.
