Most lenders require a down payment in order to obtain a mortgage for a home in Colorado Springs. FHA loans only require 3% down from the buyer unlike many conventional loan products that require at least 10% down.
Many buyers who do not qualify for down payment assistance programs and do not have available funds for a down payment, are exploring other options such as borrowing money from their 401K retirement accounts.
The money a buyer borrows out of the 401K is usually at a lower interest rate but it is not tax deductible.
Utilizing a 401K retirement plan makes purchasing a home possible for many individuals who are interested in taking advantage of the current market while it lasts. Many buyers may also borrow from their 401K in order to make a more sizeable down payment (20% of the total loan amount) in order to avoid private mortgage insurance (PMI) which results
in a lower mortgage payment each month.
There are pros and cons to using your 401K for a down payment on a home purchase and it is best to speak with your financial advisor when considering this as an option. There are tax implications if the 401K
is not repaid and it is important to understand the risks involved.
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