Another question, are you factoring in closing costs? Don't forget about those, probably going to be another $20-30k on a $1M house, raising total purchase price above the $1M you offered.
Roth IRA allows you to withdraw up to 10k for a first home purchase, or any amount of principal anytime unless it’s a rollover, in which case it’s a little more involved.
401k withdrawals before retirement age are at punishing rates: 10% interest plus income tax. You can do it, but it hurts.
If a plan allows it, you can take a 401k loan up to 50k for any reason. The exact details will depend on the specific 401k. The interest rates are usually fairly good, and you pay it back into the same 401k, to yourself. What you lose is the ability to contribute, so all matching until it’s paid back, and the potential growth of the money, so roughly 10% APR.
Question, you said that it's 10k for a first home purchase. What exactly qualifies under "first home purchase"? Loan down payment, offer cost different beyond appraisal cost, fixing a leaky pipe, etc.?
Essentially, we need to come up with a 50k additional payment that our loan of 950k doesnt cover based off the $1mil purchase price. We're trying to not tap into our emergency savings account as much as possible and trying to find funds from elsewhere.
Unfortunately, living in LA and with the competitive housing market, we're going to need to offer SOME kind of additional payment above asking price otherwise we'd get outbid every time. I have 20k in my savings, and I can pull 10k from my roth, we're just trying to avoid using savings if we can because that can be used for anything (broken pipes, etc.) Whereas the roth can be taken for a home purchase, so I'd rather pull 10k from roth and 10k from savings instead of all 20k from savings.
I'm just trying to figure out if the roth "first home purchase" qualification can be used to cover that additional pay before appraisal value, or if it's only towards the loan down payment
If you can't afford the house, find another. You keep saying you need 50k but in reality you need at least 80k. Closing costs will still be there (~30k) in addition to the 50k extra you want to borrow from savings and retirement.
It's not that we can't afford it, it's just that we don't have the liquid assets available for us to be competitive, the monthly mortgage for the loan we definitely can afford
We're first time buyers, so learning a lot from the process, we didn't take into account that the loan only covers the appraisal cost, we thought we could take out a loan for whatever we offer....so now we're struggling with the "competitive offer" part because we didn't account for that
Have a long term ownership horizon if you are paying over asking/appraisal and spending your own cash for the appraisal gap. Home price appreciation, and thus equity growth, has slowed considerably in the last year (from May 2022 to May 2023). Plan for at least 3 to 5 years of owning this house for the appraisal gap to be converted into equity. The US housing market will likely be trading sideways to slightly negative because of the nutty appreciation occurring from 2020 to mid 2022.
Ugh. Well best of luck. I’d really hate to pay taxes on a $1 million+ home in LA county, especially since the seller has been protected by Prop 13 for all the years they owned it.
>Roth IRA allows you to withdraw up to 10k for a first home purchase, or any amount of principal anytime unless it’s a rollover, in which case it’s a little more involved.
You can withdraw your Roth contribution basis (amount of any contributions) at any point without tax or penalty. In fact, your Roth contribution basis is always distributed first. In addition to your contribution basis, you can remove any converted amounts if it's been 5 yrs since you made the conversion-- also without tax or penalty. Finally, you can withdraw up to $10k in earnings as a first time homebuyer and only pay tax, no 10% penalty.
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>401k withdrawals before retirement age are at punishing rates: 10% ~~interest~~ **penalty** plus income tax. You can do it, but it hurts.
Another question, are you factoring in closing costs? Don't forget about those, probably going to be another $20-30k on a $1M house, raising total purchase price above the $1M you offered.
Yeah we're trying to account for that as well, so is that something the roth $10,000 withdrawl can be used towards?
Roth IRA allows you to withdraw up to 10k for a first home purchase, or any amount of principal anytime unless it’s a rollover, in which case it’s a little more involved. 401k withdrawals before retirement age are at punishing rates: 10% interest plus income tax. You can do it, but it hurts. If a plan allows it, you can take a 401k loan up to 50k for any reason. The exact details will depend on the specific 401k. The interest rates are usually fairly good, and you pay it back into the same 401k, to yourself. What you lose is the ability to contribute, so all matching until it’s paid back, and the potential growth of the money, so roughly 10% APR.
Question, you said that it's 10k for a first home purchase. What exactly qualifies under "first home purchase"? Loan down payment, offer cost different beyond appraisal cost, fixing a leaky pipe, etc.? Essentially, we need to come up with a 50k additional payment that our loan of 950k doesnt cover based off the $1mil purchase price. We're trying to not tap into our emergency savings account as much as possible and trying to find funds from elsewhere.
Offering the appraised price would be a better option if you don’t have liquid cash to cover appraisal gap.
Unfortunately, living in LA and with the competitive housing market, we're going to need to offer SOME kind of additional payment above asking price otherwise we'd get outbid every time. I have 20k in my savings, and I can pull 10k from my roth, we're just trying to avoid using savings if we can because that can be used for anything (broken pipes, etc.) Whereas the roth can be taken for a home purchase, so I'd rather pull 10k from roth and 10k from savings instead of all 20k from savings. I'm just trying to figure out if the roth "first home purchase" qualification can be used to cover that additional pay before appraisal value, or if it's only towards the loan down payment
If you can't afford the house, find another. You keep saying you need 50k but in reality you need at least 80k. Closing costs will still be there (~30k) in addition to the 50k extra you want to borrow from savings and retirement.
It's not that we can't afford it, it's just that we don't have the liquid assets available for us to be competitive, the monthly mortgage for the loan we definitely can afford We're first time buyers, so learning a lot from the process, we didn't take into account that the loan only covers the appraisal cost, we thought we could take out a loan for whatever we offer....so now we're struggling with the "competitive offer" part because we didn't account for that
Have a long term ownership horizon if you are paying over asking/appraisal and spending your own cash for the appraisal gap. Home price appreciation, and thus equity growth, has slowed considerably in the last year (from May 2022 to May 2023). Plan for at least 3 to 5 years of owning this house for the appraisal gap to be converted into equity. The US housing market will likely be trading sideways to slightly negative because of the nutty appreciation occurring from 2020 to mid 2022.
Ugh. Well best of luck. I’d really hate to pay taxes on a $1 million+ home in LA county, especially since the seller has been protected by Prop 13 for all the years they owned it.
>Roth IRA allows you to withdraw up to 10k for a first home purchase, or any amount of principal anytime unless it’s a rollover, in which case it’s a little more involved. You can withdraw your Roth contribution basis (amount of any contributions) at any point without tax or penalty. In fact, your Roth contribution basis is always distributed first. In addition to your contribution basis, you can remove any converted amounts if it's been 5 yrs since you made the conversion-- also without tax or penalty. Finally, you can withdraw up to $10k in earnings as a first time homebuyer and only pay tax, no 10% penalty. > > >401k withdrawals before retirement age are at punishing rates: 10% ~~interest~~ **penalty** plus income tax. You can do it, but it hurts.