A great place to look for funds to help you when you are purchasing a home is your employer retirement plan, also called a 401(k). Options here may include different types of loans and withdrawals, including what are called hardship withdrawals. It is a great resource if you are able to access the funds. Different plans will have different provisions, so check with either your human resources department or your 401(k) plan administrator.
With general purpose loans and primary residence loans, there will be limits as to how much you can access, and you may be asked to provide documentation, such as a signed sales contract, for a primary residence loan to prove that you are, in fact, purchasing a home.
Another way to access funds is through a hardship withdrawal. A hardship is a specific circumstance when you can access funds from your 401(k) when you otherwise wouldn’t be able to.
While purchasing a home wouldn’t necessarily be a hardship for you, it is one of several housing-related reasons that the IRS allows you access to your money. Other similar reasons include the need for funds to avoid eviction or foreclosure. 401(k) plans, by the way, aren’t required to offer either loans or hardship withdrawals, so contact your plan administrator or search your plan’s website for more information. The document you’ll be looking for is called the 401(k) Summary Plan Description. This can often be dozens of pages long, but it covers all aspects of the plan, including what access you have to your money.
Keep in mind that any type of withdrawal will often be subject to taxation and may have early withdrawal penalties associated with it.
Let me help you review your options when taking money from your 401(k) to purchase a home. I am just a call or email away.