Buying Myths
Thinking About Using Your 401(k) To Buy a Home?
Are you dreaming of buying your own home and wondering about how you’ll save for a down payment? You’re not alone. Some people think about tapping into their 401(k) savings to make it happen. But before you decide to dip into your retirement to buy a home, be sure to consider all possible alternatives and talk with a financial expert. Here’s why.
The Numbers May Make It Tempting
The data shows many Americans have saved a considerable amount for retirement (see chart below):
It can be really tempting when you have a lot of money saved up in your 401(k) and you see your dream home on the horizon. But remember, dipping into your retirement savings for a home could cost you a penalty and affect your finances later on. That’s why it’s important to explore all your options when it comes to saving for a down payment and buying a home. As Experian says:
“It’s possible to use funds from your 401(k) to buy a house, but whether you should depends on several factors, including taxes and penalties, how much you’ve already saved and your unique financial circumstances.”
Alternative Ways To Buy a Home
Using your 401(k) is one way to finance a home, but it’s not the only option. Before you decide, consider a couple of other methods, courtesy of Experian:
- FHA Loan: FHA loans allow qualified buyers to put down as little as 3.5% of the home’s price, depending on their credit scores.
- Down Payment Assistance Programs: There are many national and local programs that can help first-time and repeat homebuyers come up with the necessary down payment.
Above All Else, Have a Plan
No matter what route you take to purchase a home, be sure to talk with a financial expert before you do anything. Working with a team of experts to develop a concrete plan prior to starting your journey to homeownership is the key to success. Kelly Palmer, Founder of The Wealthy Parent, says:
“I have seen parents pausing contributions to their retirement plans in favor of affording a larger home often with the hope they can refinance in the future… As long as there is a tangible plan in place to get back to saving for their retirement goals, I encourage families to consider all their options.”
Bottom Line
If you’re still thinking about using your 401(k)-retirement savings for a home down payment, consider all your options and work with a financial professional before you make any decisions.
Some Highlights
- Hiring an agent when buying a home helps you understand the buying process and the local market.
- They’ll also go over contracts and fine print with you, so you understand what you’re agreeing to. Plus, they’re good at negotiating, making sure you get the best deal.
- Expert advice from a trusted real estate professional is priceless. Connect with a local agent today.
One of the biggest hurdles buyers have faced over the past few years has been a lack of homes available for sale. But that’s starting to change.
The graph below uses the latest data from Realtor.com to show there are more homes on the market in 2024 than there have been in any of the past several years (2021-2023):
Does That Mean Finding a Home Is Easier?
The answer is yes, and no. As an article from Realtor.com says:
“There were nearly 15% more homes for sale in February than a year earlier . . . That alone could jolt the housing market a bit if more “For Sale” signs continue to appear. However, the nation is still suffering from a housing shortage even with all of that new inventory.”
Context is important. On the one hand, inventory is up over the past few years. That means you’ll likely have more options to choose from as you search for your next home.
But, at the same time, the graph above also shows there are still significantly fewer homes for sale than there would usually be in a more normal, pre-pandemic market. And that deficit isn’t going to be reversed overnight.
What Does This Mean for You?
You might find a few more choices now than in recent years, but you shouldn’t expect a ton of options.
To help you explore the growing list of choices you have now, team up with a local real estate agent you trust. They can really help you understand the inventory situation where you want to buy. That’s because real estate is local. An experienced agent can share some smart tips they’ve used to help other buyers in your area deal with ongoing low housing supply.
Bottom Line
If you’re thinking about buying a home, team up with a local real estate agent. That way, you’ll be up to date on everything that could affect your move, including how many homes are for sale right now.
In today’s housing market, more and more single women are becoming homeowners. According to data from the National Association of Realtors (NAR), 19% of all homebuyers are single women, while only 10% are single men.
If you’re a single woman trying to buy your first home, this should be encouraging. It means other people are making their dreams a reality – so you can too.
Why Homeownership Matters to So Many Women
For many single women, buying a home isn’t just about having a place to live—it’s also a smart way to invest for the future. Homes usually increase in value over time, so they’re a great way to build equity and overall net worth. Ksenia Potapov, Economist at First American, says:
“. . . single women are increasingly pursuing homeownership and reaping its wealth creation benefits.”
The financial security and independence homeownership provides can be life-changing. And when you factor in the personal motivations behind buying a home, that impact becomes even clearer.
The same report from NAR shares the top reasons single women are buying a home right now, and the reality is, they’re not all financial (see chart below):
If any of these reasons resonate with you, maybe it’s time for you to buy too.
Work with a Trusted Real Estate Agent
If you’re a single woman looking to buy a home, it is possible, even in today’s housing market. You’ll just want to be sure you have a great real estate agent by your side.
Talk about what your goals are and why homeownership is so important to you. That way your agent can keep what’s critical for you up front as they guide you through the buying process. They’ll help you find the right home for your needs and advocate for you during negotiations. Together, you can make your dream of homeownership a reality.
Bottom Line
Homeownership is life-changing no matter who you are. Connect with a local real estate agent to talk about your goals in the housing market.
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