Buying Property With Your 401(k): Your Questions Answered
Is it possible to use your 401(k) to buy a home?
Using your 401(k) to purchase property is generally allowed but not necessarily recommended. Here's why: A 401(k) loan is not taxed and won't affect your credit, but it could negatively affect your retirement savings. A 401(k) withdrawal, on the other hand, comes with a 10% penalty plus income tax from the IRS. We advise against this course.
Should you use a 401(k) as a first-time homebuyer?
You can use your 401(k) money to buy a home, but this is not the preferred route. Most first-time homebuyers are at an age where they should be investing in their retirement, not reducing its amount. Plus, If you're unable to repay the loan, it may be treated as a taxable distribution, subject to penalties.
Should I use 401(k) funds to avoid PMI?
If you put down less than 20% on your down payment for a conventional loan, you will likely pay PMI. To avoid this expense, many consider using their retirement to reach the 20% threshold. However, considering the long-term costs and benefits, using your retirement to avoid PMI isn't too attractive after all.
If you're having trouble coming up with a down payment, remember that there are loan programs that require as little as 3.5% down. Explore our loan programs on our website and contact us for more info.
✅ Benefits of Contract Loan Processing for VA Loans
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Specialized VA Knowledge
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VA loans have unique requirements (COE, residual income, funding fee calculations, appraisal requirements).
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A contract processor experienced in VA loans can spot potential issues early and streamline the process.
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Cost Savings for Lenders
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No need to hire full-time staff; processors are paid per file.
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Helps smaller brokerages or lenders manage fluctuating loan volumes without carrying extra payroll.
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Faster Turn Times
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Contract processors often work remotely and are paid per closed file, so they’re incentivized to move loans quickly.
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They can push COE requests, follow up on VA appraisals, and ensure VA-specific forms (26-1880, 26-8923) are completed on time.
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Compliance & Accuracy
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VA has strict guidelines (e.g., allowable fees, seller concessions, and veteran protections).
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A skilled processor reduces risk of compliance errors that could lead to loan buybacks or funding delays.
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Scalability
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During high volume seasons (e.g., rate drops, PCS military moves), lenders can bring on extra processors quickly without long-term HR commitments.
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Reduced Loan Officer Burden
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Lets LOs focus on originating, networking, and serving clients while the processor handles gathering DD-214s, income docs, pest inspection reports (if required), and underwriting conditions.
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Improved Borrower Experience
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Veterans and active-duty borrowers often value clear communication and speed.
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A processor who knows the VA process can anticipate documentation needs and prevent last-minute surprises.
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👉 In short: Contract processors help lenders stay lean, compliant, and efficient, while ensuring veterans have a smoother experience.
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