early withdrawal of 401k to buy house

[Guest denny7]

can someone withdraw from a 401k to buy a house as a first time home buyer. please define first time home buyer.

[wmyer]

If you withdraw money from an IRA as a first-time homebuyer, there is an exception to the 10% penalty. This exception does not apply to 401(k) plans.

However, if your plan permits hardship withdrawals, you should be able to take out a hardship withdrawal for purchase of primary residence (whether first-time homebuyer or not). There would be a 10% IRS penalty unless you qualify for an exception (e.g. age 59 1/2, disability).

[GBurns]

You probably mean "loan" not "withdrawal".

If your 401(k) has a loan feature, of course, you can borrow from your 401(k) for this purpose subject to the Plan restrictions and IRS stated repayment schedule. The length of time for loan repayment is max 5 years but for a primary residence can be longer.

Definition of "first time buyer" might best be defined by your 401(k) SPD and Plan Document or operating practice. Your or my definition means nothing.

[WDIK]

Perhaps this goes without saying, but if you are taking a loan from your 401(k) plan to facilitate the purchase of a home, be sure to ascertain any impact the 401(k) loan will have on the mortgage process as a whole.

[Mary Kay Foss]

Hardship withdrawals are available to purchase a residence but a hardship withdrawal is only available if the funds cannot be obtained from any other source. If the plan allows participant loans, the maximum loans must be taken before a hardship withdrawal is requested.

A loan with a longer term is allowed for amounts borrowed from a qualified plan for a home purchase. The interest isnt' deductible because the loan is not secured by the residence, it's secured by the retirement benefit.

When applying for a mortgage, the plan loan will be considered as part of the person's over all indebtedness but since it's not secured by the residence it shouldn't affect the amount of mortgage that is granted.