401k funds for new house? Good or bad?

This whole example is skewed. FHA will loan 45% of gross, idiot math makes 4500/mo... If she can't afford or doesn't want to go above 2k/month, you will not be a home owner period, unless it's in a poor neighborhood or it's going to be a 2bd/1bth in <1k sqft. Expectations/= reality.

I would have said to take the 401k if it makes a difference because the home value will increase faster than the amount the investment will grow over a long time. Clearly, it doesn't here.

SV reX said:

I don't see how she's gonna keep her mortgage payment under $2000 per month. With only $20,000 down, it's gonna be a stretch to keep it under $3000.

and that doesn't take into account the property taxes that are likely close to $1000 per month. B-I-L's house in Wall sold for $470k a few years ago and his property taxes were $13k per year. 

In reply to bobzilla :

CHEEBUS!

I live in a Blue state with no sales tax and my property taxes on a house with a street value of around $400k are about $3500 a year for county and municipality combined.

In reply to Duke :

his house in Philly isn't much cheaper. Wife and I were complaining because our assessed value went up (1% of assessed value is Indiana's rate) so we are paying $2600 now. When we had a mortgage it was LESS than his property tax payment. 

I grew up in NJ. NJ has some of the highest property taxes in the country. 

In reply to Duke :

Sheesh. Even paying late fees, I shelled out $3200 on 13 acres and a house for summer taxes. Winter taxes are sub $400....

I live in a pretty desirable lake front property in AL.  My taxes just went up to $1640. 
 

...per YEAR.

In reply to Ranger50 :

wait, your taxes change by season? that seems.... odd. 

bobzilla said:

In reply to Ranger50 :

wait, your taxes change by season? that seems.... odd. 

Michigan. We get summer and winter taxes as well. Summer, for us, is roughly 5x more expensive and we would average out to $500/month if we paid it in Escrow.

Where I am in PA there are two tax bills, Township taxes in the Spring (due April 15, of course) and then School Taxes in September.  The latter are a little more than 2x the former.  Neither are all that big - less than a typical monthly CC bill - but I also live on a postage stamp of a lot in a twp known for below average schools. 

My ex- lives in NJ and through her and other friends I have there, I've come to appreciate my relatively low tax bills. 

Sine_Qua_Non said:

My sister is trying to get a house but is short on funds to meet the 20% down payment. I suggested that she use her 401k money. 

This is all I read.  No.  The answer is no.  I don't need to read further, it's a no.

pres589 (djronnebaum) said:

Sine_Qua_Non said:

My sister is trying to get a house but is short on funds to meet the 20% down payment. I suggested that she use her 401k money. 

This is all I read.  No.  The answer is no.  I don't need to read further, it's a no.

Unless she is older than 59.5 years there will be a 20% penalty of whatever she withdraws.    Some 401K plans allow borrowing against the principal but you still have to pay it back with timely payments or at some point its considered a withdrawal and IRS will extract the penalty.    

Looks like we had a zombie canoe situation here. Did she buy the house or find a cheaper option?

Duke said:

In reply to bobzilla :

CHEEBUS!

I live in a Blue state with no sales tax and my property taxes on a house with a street value of around $400k are about $3500 a year for county and municipality combined.

 

in illinois our property taxes are nearly 2% of the property value.  Since we escrow our property taxes my over 1/3rd of my monthly mortgage payment is just taxes, when you add in insurance its nearly 40% of the monthly cost.  

Honestly it depends on a lot of factors. The first being what does her 401k program allow for withdraws regarding putting money down on a house? Is she a first time home buyer? And so on. 

With my 401k, I could have used 30% of my 401k to use as a down payment on a home purchase. It was essentially a loan against my 401k and I would have to pay it back through paycheck deductions + interest. 

I took out a 401k loan once to take care of some credit card debt my exwife ran up. Super easy to do and payback. 

I mean the bottom line is that she needs to research the policy in her 401k and see if the juice is worth the squeeze on the PMI. 20% down isn't a mandate and she should focus on paying the closing costs so they don't get wrapped into the tail end of the loan.