Someone once asked: As a first-time buyer, is it a good idea to take money out of my 401K to avoid mortgage insurance?

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Published Date 1/10/2018

Someone once asked:  As a first-time buyer, is it a good idea to take money out of my 401K to avoid mortgage insurance?

It’s not a sin to pull money from your 401K, but whether you decide to put down more cash to avoid mortgage insurance is entirely up to you. Here’s some information to help you decide.

When lenders consider risk on a loan, the loan-to-value ratio is one of the factors they evaluate. A loan for more than 80% of the property’s value presents a greater risk in their view. To manage that risk, they require mortgage insurance which is usually paid monthly and added to the payment.

Depending on the total cost of your 401K loan vs. the cost of borrowing more money, and potentially paying mortgage insurance.

You should keep in mind that mortgage insurance on a Conventional can be temporary. Once you can prove to the lender that your loan is 80% of the property’s market value, they’ll allow you to drop it. Check with a licensed real estate professional to see what they think of the future market conditions.

One other thing to consider is that even though most 401K loans have a 15-year term, nothing is stopping you from paying it off faster. Nothing that is, except human nature. :) The fees for the loan may be the deciding factor for you.

Bottom line, this is something to take up with your licensed lender and real estate professional. Be sure you have written details about the 401K loan with you when discussing it with them.

Hope this helps...good luck!

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

American Home Lending USA, LLC - NMLS ID: 71983. To verify licensing, visit NMLS Consumer Access (www.nmlsconsumeraccess.org). Equal Housing Lender.

Jeff Beck

President

NMLS: 19488

American Home Lending USA, LLC

240 S Buchanan St, Edwardsville IL 62025

Company NMLS: 71983

Office: 618-310-0091

Cell: 618-806-2281

Email: jbeck@ahlusa1.com

Web: https://www.americanhomelendingusa.com/

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Jeff Beck

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President

NMLS: 19488

Cell: 618-806-2281

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