SWA 401k/House down payment

[PTinbound]

SWA 401k/House down payment

Here’s a question that hasn’t been asked yet, maybe because it doesn’t really have a heck of a lot to do with interviewing as such, but here goes:

After being in the Army and then the commuters for 7 years, my wife and I still have yet to buy our first home. It’s one of our biggest financial goals. Having said that, I’ve heard that when you change jobs, you can use some or all of your 401k money from the previous job on a down payment for a first home without the usual tax penalties of just “cashing out”. Could someone enlighten me on if that’s true or not? I’ve got about 13K in my current 401k, which I’d love to use as a down payment. I figure if I’m ever blessed enough to make it on the property, I won’t have many problems with enough retirement money. Of course, I could use the VA loan, but I don’t know if that’s always the best way to go.

Secondly, and this is a little more SWA specific, if I don’t use the 401K to buy a house, and I roll it over into the SWA 401K, what are the rules about borrowing against it for use on a down payment? I’ve heard this was also possible, but what are the specifics? Is there a minimum you have to have in the 401K before you can borrow from it, how much of it can you borrow (100%, 50%?), and what would the repayment terms look like, in terms of payment/ length of time to repay?

Lastly, where are a lot of SWA pilots getting mortgages from? Is the SWA FCU pretty good for that, or are there a lot of folks using USAA, etc?

Now back to your regularly scheduled programming: How will SWA get the EMB certified to go to HNL?

 

[CoopDog]

PT,

Somebody based in OAK isn't trying to make you a deal on one of those $500,000 fixer upper's, are they?

Coop

 

[Gulfstream 200]

I have heard of using a ROTH IRA as a down-payment on a first house, no penaltys.

I have never heard this about 401(k)...I thought those were pretty much tied up until retirement without taking huge penalties. I dont think you can even count them as "assets" when getting your mortgage..

but then again, Im sure somebody out here knows more than me...



Good luck with the house, you need them deductions come tax-time!

 

[holdon]

send me a pm, I can answer some of your questions and give you some help


take care

 

[sfomarc]

Dont know about the house but keep the 401k out of Southwest. Although its ok your options are limited. I would roll it over to a traditional IRA that way you can buy stock, mutual funds or whatever you want without being limited to SW's 10 or so choices.

 

[Reelbigfish]

Before you withdraw any money from your 401K remember that the "early money" put into the 401k is "worth" more. The hardest part to build is the initial amount, then when that starts compounding, it becomes easier to make money. The first few years are the worst. Also, any money you pay off with a large downpayment, will cut down your tax deductible expense. In a time like now, with interest rates at all time lows, it might be more financially sound to put a lower down payment down and take the tax deduction because it might be more than the interest you would save.
<p>Generally, you cannot take a penalty-free early distribution from a 401(k) plan for first-time home buyer expenses. You may be able to get a loan from your 401(k) plan for these expenses; it will be tax and penalty free, but you'll have to pay it back.
<p>
If you are able to take money from your 401(k) plan under a "hardship" clause, you may have to suspend making tax-deferred contributions to the plan for a year. That could cost you a bundle if you have a generous employer matching your contributions. Every 401(k) plan is different...talk to your plan administrator.
<p>
Remeber though that if you leave the company before a 401(k) loan is paid off, and you can't afford to pay it back, the IRS will treat it as an early distribution and you'll have to pay tax and a 10 percent penalty on what you owe.
Hope this helps!

 

[SWA/FO]

Don't borrow from your 401K.

Roll your 401K over into an IRA, keep it seperate from SWA. Maybe something you buy stocks, mutual funds with etc..

Check into your VA bennies

You can also do an 80% & 20 % loan to avoid PMI. Those mortgage guys know all the tricks.

never borrow from your 401k, bad very bad

 

[dashtrasher]

Go talk with a CPA. They should be able to advise you on any question you have regarding the best route for your 401K and the downpayment on your home.

 

[buzzfly]

The downside with borrowing from your 401K is double taxation. Your payments on your 401K loan are after tax. These payments are taxed again upon distribution at retirement.

 

[flying@swa]

Go visit

a CFA - Certified Financial Advisor..... much better than a CPA for matters of investing/401ks, IRAs, etc.... if you are an American Express card holder you can see one of their advisors 1 yime @ no cost.

I used the VA for my 1st 2 house purchases.... any way you look at it - a 0 DOWn loan is a great deal and one of the ONLY beenis you have as a non-retired vet. Use it!

Flyin'