Nightmare 401k Withdrawals For Home Buying
(Savannah, Georgia, USA)
Ask Kate about Nightmare 401k Withdrawals For Home Buying: Kate, My husband and I had a condo but wanted a house. We put the condo up for sale and found the house we wanted.
The rest of the story ...
Afraid that we would lose the house, I took money from my 401K for the down payment, intending to put it back when we sold the condo.
Then the bottom fell out and despite our efforts, we have not been able to sell either one - house or condo. Now, both are under water. Loans on both were traditional 30 year conventional mortgages.
The house is in a new neighborhood that would have been gorgeous if the developer had not gone bankrupt. Now, not even the HOA (home owner's association
) exists, except what the actual homeowners have put together. The development is not expected to "build out" to capacity for 20-25 years now.
I am 64, my husband is 67. The condo is in a very nice settled neighborhood. We have not even been late on either mortgage, but we feel that we are pouring good money after bad, plus we have lost all the equity that was supposed to go back into my 401K for retirement.
Last week, I was "restructured" out of my job. We are thinking about just walking away from the house, moving back to the condo, letting our credit be ruined, and just hoping we don't end up homeless altogether. What would you do?
Kate Answers: Nightmare 401k Withdrawals For Home Buying
Dear Homeowner, It makes me feel sad to read your letter.
Other homeowners with perfect credit histories, having never dreamed of being late on payments, are finding themselves in the same boat as you.
Call it a dilemma or an epidemic, terminology is of little comfort to people who are losing their homes after a lifetime of building financial credibility.
401k Withdrawals - Equity Losses - Unemployment
You are indeed suffering from the quadruple whammy - equity losses, two monthly house payments, recent unemployment and 401k withdrawals that cannot be repaid.
So let's regroup and think about options to avoid or stop mortgage foreclosure
. But first things first. Which property is more important to you, the house or the condo? In a moment you'll see why I asked you this question.
I understand it's uncomfortable to think this way. You've always thought long term and it just isn't in your financial DNA to walk away from a property. But if you can't afford both properties, taking care of your immediate needs so you won't find yourself homeless is important.
Mortgage Modification - HARP - FHA Short Refinance
Here are three programs that come to mind which might possibly deliver a solution. Mortgage loan modification
, HARP Home Affordable Program and FHA Short Refinance. (more on these later)
None of the three can replenish your 401k withdrawals, put the builder back in business or return your job. But hopefully one option could help you lower the monthly payments on the home you intend to make your personal residence.
Go now to my articles on this website, Mortgage Loan Modification - a proven loan modification system
, HARP - Making Home Affordable Help
and FHA Short Refinance
, which by the way is not
for current FHA borrowers.
Real Estate Short Sale
Then for the second property, perhaps the short sale process
would get it off your hands before it is subject to mortgage foreclosure. Check with a trusted real estate agent
who would help you negotiate a sales price with the lender, one that reflects current market values and is probably less than your loan balance.
Home Builder or Developer Bankruptcy
Another thought regarding the Home Builder / Developer bankruptcy. Have you checked into state funds insuring homeowners against a developer default? If I were an affected homeowner, I'd certainly check into it. See if Georgia's state website makes mention of any such funds.
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