401K for Down Payment Understood

401K for Down Payment Understood

Why is your 401(k) an attractive source for short-term loans? Because it can be the quickest, simplest, lowest-cost way to get the cash you need. Receiving a loan is not a taxable event unless the loan limits and repayment rules are violated, and it has no impact on your credit rating. Assuming you pay back a short-term loan on schedule, it usually will have little effect on your retirement savings progress.  Since you are borrowing from yourself, your 401K plans traditionally allow you to borrow up to $50K or half the vested value on your 401K (whichever is less). 

Borrowing your down payment funds from your 401K can be a very good investment.  The benefits of buying a home (equity appreciation, forced retirement, tax benefits) greatly outweigh the small expense of a 401K loan.
Borrowing against your 401K can potentially allow you to obtain a better loan as well.  Down payment assistance programs are a great option for those that don’t have any other resources for the down payment, but they are costly with higher interest rates and fees than traditional loans. 

Most lenders, including Sierra Pacific, do not count 401K payments against your debt to income ratio, allowing you to borrow more on your home.  If you are borrowing at the maximum of your qualifications, however, it may not be a good idea to take on additional debt.

A recent article by a very reputable online magazine described borrowing against your 401K as “sabotaging your retirement”.  Ahem…your home is your most important retirement vehicle.

A word of caution though – using your 401K for acquiring a depreciable asset (big screen TV, jetskis, you get the picture) can be damaging to your retirement plan. It can also lead to serial use of your 401K as a checkbook, which your 401K was never designed to do.

Don't be scared away from a valuable liquidity option embedded in your 401(k) plan. When you lend yourself appropriate amounts of money for the right short-term reasons, these transactions can be the simplest, most convenient and lowest cost source of cash available. Before taking any loan, you should always have a clear plan in mind for repaying these amounts on schedule or earlier.

"If it Bothers People, Then It's Working"

The national debt clock tracks the U.S. debt, which topped $21 trillion on March 15, 2018. The clock is physically located at One Bryant Park, west of Sixth Avenue between 42nd and 43rd Streets in New York.  Real estate investor Seymour Durst created the debt clock on February 20, 1989. He first put it up at Sixth Avenue and 42nd Street. That's when the national debt was nearing $2.7 trillion and 50 percent of gross domestic product. Durst said, “If it bothers people, then it's working.”

Why the clock is important to real estate and mortgage is that as our debt increases and the dollar is devalued, foreign interest in our Treasury bonds will diminish.  Interest rates are based on bond pricing.   The rate of return must be increased on bonds that diminish in value as the debt increases and foreign and domestic investment in our bonds decreases.  This raises rates.

How do we fix the debt?  We'd like to hear your thoughts. 

Stop Living Paycheck to Paycheck

Stop Living Paycheck to Paycheck

Let’s face it – we are in the home buying business and have a vested interest (no pun intended) in you saving your money to buy a home, but…we also have lived from paycheck to paycheck like most people.  On the Easterbrook Team, we also have a vested interest in making the word a better place and ultimately making YOU happier. 

This article is a great place to start on your road to financial recovery.  Step 4, automating your savings, is a simple revelation that will change your life.  So, go ahead, free yourself from those financial bonds and make YOUR world a better place – CLICK HERE.

The Easterbrook Team

916.850.6050

EasterbrookTeam@spmc.com

Yelp Yelp, Yelp Us Out!

We’ve been Yelped – in a good way.  We have been very fortunate to have worked with some of the most awesome agents and buyers.  Many have told us how they feel about the process on Yelp.  We invite you to share your experience too.  Thanks in advance for sharing: CLICK HERE.

The Easterbrook Team

916.850.6050

EasterbrookTeam@spmc.com

The Home Loan Workshop Has a New Time

We’ve been testing the public’s interest and availability for the Home Loan Workshop.  We’ve found that 6pm on a Thursday afternoon is a little difficult for some folks.  We’ve changed the times to 5pm and 6pm on Saturday to accommodate people’s busy schedules.  We’ve also increased the regularity of the popular classes.  Send your buyers to the website if they want more information – http:homeloanworkshop.org.

The Easterbrook Team
916.850.6050
EasterbrookTeam@spmc.com

PIW – Lending Without an Appraisal

Fannie Mae and Freddie Mac have been allowing PIW’s (property inspection waivers) on eligible properties.  This completely takes the appraisal equation out of the transaction.  With a PIW there is no worry of a low appraisal or delays waiting for an appraisal to be completed.     

Since 2009, Fannie & Freddie have been collecting information from the appraisals that were being conducted and submitted into the UCDP (Uniform Collateral Data Portal). Desktop Underwriter is using this information and releasing automatic underwriting findings to include the mortgage transaction to be completed without an appraisal.

Not all properties are eligible, but many we are finding do.  One way to strengthen a purchase offer is to have us run Desktop Underwriter before the offer is submitted.  A PIW could tip the scales in the buyer’s favor against multiple offers.  

On the Easterbrook Team, we are always thinking of ways to help our agents do more business with greater ease and customer satisfaction. 

The Easterbrook Team
916.850.6050
EasterbrookTeam@spmc.com

The Survey Says...

There is good news in the housing industry.  A majority of US households have a positive attitude toward housing. Based on two recent surveys by the Federal Reserve Bank of NY and Charles Schwab:

·         49% of Americans feel wealthy when they own a home.

o   62% also defined wealth as spending time with family – we like that.

o   55% indicated that wealth means having time to themselves.

·         65% of all respondents think that buying property in their zip code is a “very good” or “somewhat good” investment, compared to 60% in 2016. Only 10.6% said housing was a “bad investment”.

·         For agents wanting to target the ideal homebuyer, the favorable view on housing was particularly pronounced among younger, more educated (bachelor’s degree or more), and higher-income (annual income of $60,000 or more) households.

·         Renters who want to buy a home continue to perceive obtaining a mortgage as difficult. Renters continue to report a strong preference for owning homes, although it weakened relative to the previous two years, the survey found.

·         How much is enough? Respondents said that they believe:

o   $1.4 million is enough to be considered financially comfortable.

o   $2.4 million is enough money to be considered “wealthy”.