If I am a first time home buyer can I take 401k out and am I penalized?

Answer 1

1) Depending on your plan, you may be able to "borrow" from your 401k for a down payment on a home. There are no taxes is or penalties on this transaction as you must pay the money back.

2) If you "withdraw" money from your 401k, even for the purchase of a first home, you will pay taxes and a 10% penalty. The exception to the 10% penalty for first time homebuyers only applies to IRAs; not 401k's.

Answer 2

The way I understand your question is that you want to take money out of your 401K to assist in the process of buying your first home. If you need to do this then you are not financially ready to purchase your first home. Yes you will be penalized. Why establish a 401K if you are willing to draw from it? Go see a mortgage lender and discuss all finacing options first. Read articles on financing homes on the interenet. Go to your local book store and learn how to buy a home. Most first time home buyers fail to do their homework and learn the hard way. There are many programs out there that have 1st time buyers incentives with little to no down payments. Currently the market across the US is slow as an average. Builders,sellers, and mortgage companies, are all inducing people to buy. Please be careful. The best advice I can give you is to take your state approved real estate course. For a minimal investment of around $300 to $400 dollars (dependent upon the state) you will learn a lot about real estate. Yes you will have to sacrifice some time in the evening or weekends (most state courses require anywhere from 60 to 90 hours of instruction. My state, NC, requires 75 hours). I paid $385.00 and 75 hours of my time for a lifetime of knowledge. Most states have approved online courses now also. Upon completion of a course like this you will be an extremely informed consumer. I will close by saying once again, be careful. This is a monumental finiancial decesion that will affect you for years to come. Don't enter into this lightly, get educated. Good luck.

Answer 3

Yes you can borrow against your 401K for a home purchase without incurring a penalty. Call your 401K Administrator for details.