3OYS: Borrowing from 401k not just for first-time home buyersPosted: Updated:
PHOENIX -- It doesn't seem long ago that foreclosure and short-sale signs were nearly everywhere.
Now, many of those people are looking to buy homes again but are having trouble coming up with a down payment.
Home financing experts have a possible solution to the problem.
"A great way to purchase a home with a down payment is to tap into your IRA or your 401k," said Diane Gerdes, a loan officer with The Mortgage Advantage in Tempe.
Gerdes and others in the industry say most former homeowners mistakenly believe they cannot tap into their retirement accounts for a down payment on another home without being penalized, but that's not necessarily true.
For example, homeowners who went through a short-sale and have been renting for awhile are actually considered first-time home buyers because they have been sitting on the sidelines.
"Typically, you're considered a first-time home buyer if you haven't owned a home for three years," Gerdes said.
However, there are some rules when borrowing money from a retirement account to fund a down payment.
Home buyers cannot take more than $10,000 from the account, and they will likely have to pay taxes on the money they withdraw.