The answer is yes—but before you go that route, it’s important to understand how it works and whether it’s the right move for you.
Here are your two main options:
1. Borrow from your 401(k)
This is typically the better option if you’re considering using your retirement funds. You can usually borrow up to 50% of your balance (up to $50,000) and pay it back over time—with interest going back into your account.
Pros:
- No early withdrawal penalties
- No taxes (as long as it’s repaid properly)
- You’re paying yourself back
Cons:
- Payments are required (like a loan)
- If you leave your job, repayment could be due quickly
- Your money is temporarily out of the market
2. Withdraw from your 401(k)
This is the more expensive option and should be approached carefully.
Cons to consider:
- Subject to income taxes
- 10% early withdrawal penalty if you’re under 59½
- Permanently reduces your retirement savings
Important: Unlike IRAs, 401(k)s do not have a first-time homebuyer penalty exemption.
Before you touch your 401(k), look at this first 👇
There are programs specifically designed to help first-time buyers with upfront costs.
One of the best options here in Pennsylvania is through the Pennsylvania Housing Finance Agency (PHFA), which offers:
- Up to 5% of the purchase price in assistance for down payment and closing costs
- Forgivable loan options (in many cases, you may not have to pay it back)
- Competitive interest rates
- Flexible credit guidelines
For many buyers, this can eliminate the need to dip into retirement savings altogether.
The bottom line
Using your 401(k) can be a helpful tool—but it shouldn’t be your first option without exploring all available resources.
The goal isn’t just to get you into a home… it’s to do it in a way that sets you up for long-term financial success.
If you’d like help reviewing your options, running numbers, or seeing what programs you qualify for, contact us (215) 757-7257 or TheSwainTeam@gmail.com