re: Borrowing money from 401k...how does this work usually?

If someone smarter than me wants to correct me, please do, but I am under the impression that the note on your loan from your 401(k) would be due immediately if you get fired/laid off from your company. Be careful

Is the 401K money with your current employer? If not you can just roll it into an IRA and use that as a down payment with no need for a loan.

Up to 10K is permissible with no tax consequence. But if it's with a current employer I think you might have to do the loan

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PMI is LIFE OF THE LOAN now on ANY new fha loan

It decreases, but never falls off without a refinance

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Some lenders offer traditional loans with as little as 5% down. Usually credit unions. No PMI required.

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If it is FHA, it's life of the loan

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Yes

I understand that. What he is saying is he has the money for 3.5% which is the FHA requirement and he needs to get enough for 5% so he doesn't have to get an FHA loan.

Understand now?

First NBC has an up to 100% financing. No mortgage insurance. You have to take a home buyers class. You must be a first time buyer.

They call it community pool.

Has a 1% origination fee on top of whatever the bank fees and closing costs are.


Eta: rates are market based.

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so, be a little careful. Not with the builder necessarily, but I have seen time and time again where the neighborhood doesn't fill but the sign out front still says *starting in the 225's or whatever. Then a few years later someone sells for whatever reason and they can't even get the new build price and values fall.

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This exact thing happened to my current house and is the only reason I'm still in it

It has recovered about to what I paid for it but I thought i would have some appreciation after 7 years.

Live and learn

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I know you have to pay taxes on the disbursement

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Not if used for a first time home purchase

And even the first time home purchase has a pretty loose definition.

See below

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Then, there's your home. Uncle Sam offers various tax breaks for homeowners. He'll even bend the IRA rules a bit to help you get into your house in the first place.

You can put up to $10,000 of IRA funds toward the purchase of your first home. If you're married, and you and your spouse are first-time buyers, you each can pull from retirement accounts, giving you $20,000 in residential cash.

Even better is the IRS definition of "first-time homebuyer." Technically, you don't have to be purchasing your very first abode. You qualify under the tax rules as long as you (or your spouse) didn't own a principal residence at any time during the previous 2 years. In fact, you can even share your IRA wealth. The IRS says the first-time homebuyer using your IRA funds for a down payment can be you, your spouse, one of your children, a grandchild or a parent.

But be careful not to take out your money too soon. You must use the IRA funds within 120 days of withdrawal to pay qualified acquisition costs. This includes the costs of buying, building or rebuilding a home, along with any usual settlement, financing or closing costs.



Read more: LINK

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I understand some of you might not know the Nashville market, but the only reason I even have a shot at this house is a friend I trust very much lives there and is one of their realtors.

80% of them are already sold and I'm on top of a waitlist for the rest (due to said friend). I reached out to them to ask about it, not the other way around. He is the opposite of pushy and like I said, I trust him very much.

And the neighborhood outside this development is consistently rising in demand for the last 10 years. And its a 2 minute commute to me and my wife's office. Nashville housing market is fricking absurd. My friends who live there bought 1 year ago and their neighbors sold for 50k over what they paid in 8 months. I'm getting it at a price per/sq. ft that is very good for the area currently as well.

I have talked to the 401k folks and several other colleagues who have done the borrow option, and its way better than what is being said in here. Obviously, its a per case thing, but in my case its a solid deal for what I need and its not some insurmountable amount of money. It would be a monthly payment roughly equal to what I currently put into the 401k, so I could just stop contributing for 1 year and allocate that money to repaying the loan. I'm 28 and don't put some massive amount in my 401k each month either.

And 5% is for traditional loan with my lender. The entire point of going over 3.5% (which I have currently) is to avoid an FHA so the PMI falls off at 78-80% owed.


And to repeat, this house would have very, very affordable mortgage for us. Very similar to what we currently pay in rent and still live comfortably. Its a small townhome that I would rent eventually when the PMI falls off when we outgrow it due to its great location. Its extremely close to downtown and a ton of office buildings. And due to the breathing room of the mortgage will continue to put away savings each month.

Its happening...so just wish me luck



ETA:

People pay in cash, over asking, the HOUR they go on sale in these neighborhoods in Nashville right outside downtown. Its truly ridiculous. This is one that hasn't gotten too absurd to afford yet, but its very, very close to that point.

Have a buddy who put his house on the market in a fringe Nashville neighborhood, much further than where I'm buying.

On market for 385k...within 12 hours they had bids up it to 420ish and sold that night.

He paid 310k a little over 2 years ago. All he did was paint the thing inside and outside.

Nashville adds 81 employed people per day apparently right now and those numbers are trending up. Growing so fast it's crazy.

That is average for Nashville right now.

It sucks to be my age and looking for a home in town unless you have a super rich family or get paid 200k a year. Rent is super high too. 1 bedroom places in town are $1,500 and up a month. 2 bedrooms 2k+.

I'll eventually settle down with kids and move to the burbs, but I'm not ready for that. I want to be close to the action and very close to work.