Can I use 401(k) funds for a conventional down payment?
Yes. A 401(k) loan against your own balance is allowed and does not count as new debt for DTI under Fannie/Freddie rules (the repayment is treated as a contribution, not a debt). A 401(k) withdrawal triggers tax consequences — talk to a CPA before pulling.
Plain-English explanation
401(k) loan: borrow against your own balance, repay with payroll deductions, no DTI hit on most lender setups, no tax penalty as long as the loan is repaid. The funds are seasoned and sourced once they hit the bank account. 401(k) withdrawal: taxable distribution, 10% penalty if under age 59½, lost retirement growth. Most planners and CPAs prefer the loan over the withdrawal.
What can change the answer?
Gift source, seller credit limits, DPA program rules, source-of-funds documentation, and program eligibility (HomeReady, Home Possible) can change the answer.
Want the real answer for your conventional file?
Conventional guidelines are the rule. Your credit, income, DTI, PMI, LLPAs, and Florida payment math are what decide the actual answer.
More conventional questions on Down Payment
Educational only. Conventional loan guidelines, lender overlays, rates, fees, PMI, LLPAs, and underwriting requirements can change. Final eligibility depends on full underwriting review.