SWA 401k/House down payment

[Icebergclub]

401k "Loan".....can be a great deal!

PT,
Each 401k program has it's own rules. Here at Atlas, I took out half of my 401k balance for a downpayment on a house. I now pay myself back monthly with interest. I still make my usual 15% contribution each paycheck but now I also pay back my "loan" at 5% interest, the interest is paid back to myself (back into the 401k account).

There were no fee's or penalties for this "loan". The only way to take a tax hit would be to quite your job and not pay back the loan in full. Then your going to take the big tax hit. I have 10 years to pay back the loan only if I stay employed at Atlas. There lies the problem for me!! I'am hoping for that Jan/Feb SWA class date!!!

Not much of a decision though! I'll take the class and the tax hit!

It's a good program to get into your first home. There were also no rules on how you had to use the money. You could draw out up to 50% for any reason and still use the same payback interest and payment terms.......it's really a good deal if you have no other way into a house or if a emergency arises. One note, is that my company did not seem to know anything about the program, I found out everything through the 401k administrator (Fidelity). So you might want to check directly with your admin.

Thats all I know.........

Iceberg

Hello to all the fellow poolies out there!!! Were gett'in closer! To all you junior guys stuck in OAK.....I hope to be there soon! I cant wait to take one of your spots.........Fly safe and happy holidays to everybody.

 

[Dave Benjamin]

Why not VA financing?

PT,
Congrats on making the cut to SWA.
Unless you plan on OAK as a domicile you might want to consider VA financing for your home. Assuming you're elgible which you should be as an Army vet VA offers 100% financing with no PMI. They also offer some very slick refi options like IRRL. I have refi'd twice in the past couple of years and it took less than 7 months to recoup the expense of 1/2 a point.
If you want to live in or around OAK you are hosed. VA doesn't do $500,000 loans. You can get houses on the wrong side of 580 for a lot less but you'll need to stay in at night. On the plus side if you live in OAK you have the old "Governor Moonbeam" running the city. There are some alternatives to living close to OAK further out in the east Bay Area like Concord or even Benicia. You can commute in on BART fairly easily if you don't enjoy the daily gridlock. I grew up in the Bay Area and it's a shame how things have turned out down there.
Feel free to PM me. I'm sure I'm wasting bandwidth here bashiong my old stomping grounds but I know the Bay Area pretty well.
I can't say enough good things about VA financing though. It allowed us to hang on to our cash so we're looking for some investment property now.

 

[PTinbound]

Well folks, just to clarify, I washed out of A+P school in college so I wouldn't be a big candidate for a "fixer upper" in OAK. We're actually thinking of getting back to Texas (within 1.5 hours of HOU) or possibly NW Indiana (within 1.5 hours of MDW). Of course, I've got a 12 year old daughter who wants a horse or two with a few acres of land. I can't imagine getting something like that for much under $200k, and I don't know but I seem to remember something about a 200k limit for VA loans. Does anyone know if that's true?
Also, anyone know SWA's policy on taking out loans from the 401K? I wouldn't be doing this until probably third year pay anyway, assuming we hear about class dates. We are absolutely not ready to buy a house now while I'm at a regional, nor could we on first year pay at SWA. So I have a while to think about it. Heck, I doubt if I could get a mortgage for more than 120 now, nor would I want to. Thank you all for your ideas and keep them coming!

 

[PTinbound]

Well, I just answered one of my own questions. I went to va.gov and found out that in most cases you could get a VA loan for up to 240k. Now I bet I could find 4 or 5 acres somewhere outside of HOU for that....

 

[canyonblue]

Now I bet I could find 4 or 5 acres somewhere outside of HOU for that....

Yea, it's called Hobby.

 

[Mr. Irrelevant]

True but payments you make to any loan are after tax. You arent really borrowing from your 401, you're borrowing against it. If you have 100k in your 401 and borrow 50k your ballance in your 401 account is still 100k. You still own all of the shares that you owned prior to the loan. If the shares increase in value you still see all of the return that you would have had you not taken out the loan. And if it cost you 5k in interest payments over the life of the loan that money goes into your account as well.

Sorry xXpress1, I've been out of the investment management game for only 4-5 months but I'd be shocked if what you posted wasn't 100% wrong. One of the big downsides to borrowing from a 401k is the possible loss of retirement $$$ due to appreciation in the market while you're paying back your 401k. It can be substantial if the timing is wrong!!!! Obviously there are benefits to borrowing, but there is probably more to PTinbounds situation than we can all know and only he and probably a financial planner should sit down and figure it out. Good luck PT. Big decision.


Mr. I.

 

[Snoopy58]

There is an excellent financial advisor on staff at SWAPA; when you (P.T.) get the intro to SWAPA, ask about it & they'll give you his name & phone extension. Good guy to talk to, and he can give you the low-down on how borrowing from the pilot 401(k) will work. He may or may not get too deep into your specific situation; if not, he can probably recommend someone who can.

As you said, this is a little ways off in the future, and rules & tax laws & such can change between now & then. SWAPA will have the answers for you well before you're making an offer on the new P.T. Manor!

Cheers,

Snoopy