Did you know you may be able to use your 401K assist in buying a home?

It can be really tempting to dip into this account when you have a healthy amount saved up in your 401(k) and you see your dream home on the horizon. 

The average 401K Balance across age groups does open the option for many people to utilize these funds.

But remember, dipping into your retirement savings for a home could cost you a penalty and affect your finances later on. It's important to explore all your options when it comes to saving for a down payment and buying a home. 

Talking with your financial advisor and fund holder can help you determine what penalties and parameters there are around using these funds to purchase a home. Here are some considerations:

The Numbers May Make It Tempting

The data shows many Americans have saved a considerable amount for retirement (see chart )

Alternative Ways To Buy a Home

Using your 401(k) is one way to finance a home, but it's not the only option. Before you decide, consider a couple of other methods, courtesy of Experian:

• FHA Loan: FHA loans allow qualified buyers to put down as little as 3.5% of the home's price, depending on their credit scores.

• Down Payment Assistance Programs: There are many national and local programs that can help first-time and repeat home buyers come up with the necessary down payment.

Above All Else, Have a Plan

No matter what route you take to purchase a home, be sure to talk with a financial expert before you do anything. Working with a team of experts to develop a concrete plan prior to starting your journey to homeownership is the key to success. Kelly Palmer, Founder of The Wealthy Parent, says:

“I have seen parents pausing contributions to their retirement plans in favor of affording a larger home often with the hope they can refinance in the future… As long as there is a tangible plan in place to get back to saving for their retirement goals, I encourage families to consider all their options.”