3 things to know about the appraisal process

Whether you are buying or selling a home, the appraisal is the most critical aspect of the process.

No matter how carefully the seller’s agent researched the current market, no matter how much the buyer is willing to spend on the home, the fact remains that the lender relies solely on the appraiser’s estimate of value when deciding how much to lend to the borrower for the purchase.

A low appraisal, therefore, changes the whole game.

Let’s take a look at the process and three things you should know about it.

1. The Appraiser

The appraiser is a specialist hired by the buyer’s lender to determine a property’s current market value and they use a number of methods to figure it out.

First, they measure the property and then they will compare the measurements to the legal descriptions of the property held by the city or county.

They will also evaluate the neighborhood in which the home is located. They’ll use city or county sources, along with MLS statistics, to obtain information on recent sales in the area. They may draw land diagrams and they always write a written report for the lender and the buyer.

2. Why the Appraisal may be low

The market value determined by an experienced real estate agent typically matches, or comes close to, the appraiser’s estimation of value.

Low appraisals generally occur when the seller uses an inexperienced agent and they are also quite common when the home has received multiple offers. Bidding wars frequently cause a home to go into contract for more than it’s worth.

Then, there are homeowners who don’t take the agent’s advice and overprice the home. They feel vindicated if they receive a full price offer but that feeling is dashed when the appraiser agrees with the agent that the home isn’t worth as much as the buyer is willing to pay for it.

Other reasons for a discrepancy in the home’s evaluation include:

  • A shift in the local economy that impacts the housing market. If a whole bunch of foreclosures hit the market quickly, for instance, surrounding home values decline.
  • The agent and/or the homeowner may undervalue certain improvements made to the home. In this case, the appraisal may come in higher than expected.
  • The appraiser may feel the home’s location, or problems, drag down its value more than the agent and homeowner did.

3. How to Deal with a low Appraisal

Let’s face it, a low appraisal is the pits. Buyers and sellers have only a few choices when faced with one.

“For the sale to go through, the buyer will need to either negotiate with the seller to take less for the home or make up the difference – also known as ‘the appraisal gap,’” according to Andrew Dehan at rocketmortgage.com. 

Taking less for the home is not an attractive option for most sellers. The truth is, you’ll be faced with this same dilemma with the next buyer, the next buyer and the one after that.

By the same token, buyers typically don’t want to fill that appraisal gap by paying more for a home than it’s worth.

Another solution to a low appraisal is for the buyer and seller can meet half way. The seller can lower the price and the buyer can bring in more cash.

Finally, the buyer can challenge the appraisal. This isn’t as easy as it may sound. The seller will need to get involved by verifying the accuracy of the report.

Appraisers are human and they sometimes get things wrong. Some of these include square footage, the number of bedrooms or bathrooms and the age of the home and these errors may be on the subject property or the comparables used by the appraiser.

Sometimes sellers have knowledge about the conditions of a particular sale in the neighborhood that the appraiser isn’t privy to. Perhaps your neighbor got a job offer in another state and to get there quickly, took a low offer.

At any rate, if you find inaccuracies you can challenge an appraisal and request a new one from the lender. The lender is under no obligation to agree with your request, but it’s certainly a question worth asking.

Questions about selling or buying a home? Feel free to contact us.

The 4 basics of spring cleaning

The Washington Post calls spring cleaning “the annual guilt trip.” The tradition traces its history to the days when homes were lit and heated with kerosene, wood, coal and oil. When the weather warmed and the sun shone, women would transfer the home’s entire contents to the outdoors and then attack the grime indoors.

Old habits die hard and the spring cleaning ritual is still very much alive. As with any process with multiple “moving parts,” this one is easiest when you break it down into its most basic components.

1. Dust

All those cozy, warm fires you enjoyed over the winter can leave fine dust and ash on most surfaces in the home, including the walls. Get out the duster and get to work, starting with the ceiling, and working your way down.

Don’t neglect the ceiling light and fan. Hardware stores typically carry either long-handled or extendable dusters which will keep you off the ladder and out from under the falling “gunk.”

You can find them online at Lowe’s, Home Depot and Amazon.com.

2. Windows

The wintry mix really takes its toll on our windows but a quick clean will allow all that glorious springtime sunshine to stream through.

Remove fabric window coverings and wash or dry-clean them. If you have blinds, give them a good dusting, then raise them to get at those windows and then remove the screens.

Use a solution of mild dishwashing soap and a strip applicator to wash the windows. Then, swipe a squeegee across them to remove the dirty water. The pros at This Old House offer a handy walkthrough of their easy and effective window-washing process online at thisoldhouse.com.

Once the windows are sparkling, all that’s left to do is to wipe down the sills, clean the tracks (give each a squirt of lubricant after cleaning) and attack those dirty screens. Use the same type of soap-and-water solution you did for the windows and a soft scrub brush on the latter.

3. Baseboards 

Even though they aren’t within our direct line of sight when we enter a room, clean baseboards can make the entire room feel fresh.

If there is still dust leftover from your dusting session, get rid of that first. A whiskbroom or even a paintbrush works well for this.

Home maintenance expert Bob Vila recommends using a solution of dishwashing soap and water on painted baseboards, but vinegar and water works as well. If your baseboards don’t require scrubbing, use a magic eraser product instead.

4. Floors 

Carpets

The flooring experts at Empire Today recommend a thorough and professional cleaning of the carpets in the home to set the stage for a healthy, happy spring.

Naturally you can DIY this project or, hire pros to do it for you.

Hardwood Floors

Avoid scratching your hardwood floor by getting rid of every last speck of dirt, dust and debris before cleaning it.

Then, use a cleaning solution recommended for the type of finish on your floor. If your hardwood flooring is relatively new, it’s most likely surface-sealed with polycrylic, polyurethane or urethane. Older floors are either not sealed, or finished with oil, lacquer, shellac or varnish.

Surface-sealed hardwood floors are the easiest to clean; just sweep or vacuum and then run a damp mop over them. Floors with other finishes take a bit more work to bring them up to epic spring-cleaning standards.

Depending on the beating the floor took over the winter, this may include stripping the old wax and applying fresh wax and then buffing it. Rent floor buffers at Lowe’s, Home Depot and other home improvement outlets.

Laminate Floors

Popular for their easy-care requirements, laminate floors typically respond well to a damp cleaning with a commercial laminate-floor cleaning product. The experts at Mohawk FloorCare recommend using a microfiber, terrycloth or cotton mop and to avoid wet-mopping (keep it damp) your laminate floor.

Use an acetone-based fingernail polish remover to carefully remove any stubborn stains. Wax or chewing gum will come up by rubbing them with an ice cube and then using (gently) a plastic-edged scraper.

Sure, there are a seemingly-endless number of things that will require a deep cleaning this spring, but focus on the basics first and the rest won’t seem so daunting.

Why NOW is the time to make your real estate move

The latest housing market statistics show continued good news for home sellers. The nationwide median sale price in March increased 13.5% from March 2021 to a record-breaking $405,000 (Monthly Housing Trends Report).

During this time period, sellers, on average, received 1.4% over the asking price for their homes. In fact, nearly half of all sold homes were purchased for more than the asking price.

Despite this, homeowners, by and large, are still not putting their homes on the market. To add to a homebuyer’s woes, new home construction is at a standstill for many builders.

“… supply chain disruptions from the pandemic have meant garage doors are on back order, floor tiles keep getting discontinued mid-construction, and appliances are marooned aboard waylaid shipping vessels,” according to Alicia Wallace at KCRA.com.

There has rarely been such an ideal time to sell a home. You’ll have little competition and will enjoy record high prices.

But, it won’t last forever.

Mortgage rates are rising

The Fed warned us that interest rate hikes were coming and they came through on the promise. We can expect a total of “… seven quarter-of-a-percentage-point interest rate hikes this year,” according to Ann Sipher, (citing Chicago Federal Reserve President Charles Evans) at Reuters.com.

He adds a caveat, however: because the economy is facing uncertainty, he reserves the right to change his mind.

With every hike in mortgage rates, home buying becomes more expensive, so a number of homebuyers are knocked out of the market. When fewer people are fueling the demand for homes, prices soften.

We’re hearing, in fact, that some housing market experts are predicting that the housing market nationwide will cool as we near the end of 2022.

“The higher rates and prices go in 2022, … the more buyer pushback we should see next year,” Devyn Bachman with US housing industry research and consulting service John Burns predicts at fortune.com.

Are you willing to take a chance that you will get less for your home in the future than you will if you sell now?

“Better three hours too soon than a minute too late”

No, William Shakespeare wasn’t referring to the real estate market when he wrote those words in  1602 (The Merry Wives of Windsor). But the importance of not procrastinating certainly fits our discussion.

Trying to time the market – waiting on the sidelines for the right time to jump into the local housing market to sell your home – isn’t a wise move. Here’s why:

All markets are cyclical, including the housing market

You can watch all the economic indicators available and still be getting only part of the story.

And, since none of us has a crystal ball, the odds are good that your home is worth more now than it may be down the line

According to the researchers at CoreLogic, “In the fourth quarter of 2021, the average homeowner gained approximately $55,300 in equity during the past year.”

Think about this. That is a substantial rise in equity and it could help make the transition into your next home a lot more comfortable.

For instance, that equity will help you pay a larger down payment on your next home, which could mitigate the effects of a higher interest rate on your mortgage.

We’re happy to put you in touch with a trusted lender to help you crunch the numbers and to offer a complimentary, no-obligation analysis of your home’s current market value.

The dangers of relying on first impressions when shopping for a home

When you’re looking at homes, pay close attention to your first impressions: they can be very powerful. They’re also often incorrect. A carefully appointed house with good curb appeal and a compelling atmosphere can blind buyers to its flaws and potential problems.

How Important are First Impressions When Home Buying?

First impressions have a dramatic influence on home buyers. Many buyers decide whether or not they are interested in buying a home within minutes of seeing it from the street.

Both real estate agents and home sellers understand that choosing a home often comes down to first impressions. There are companies that do nothing other than “”stage”” homes to lure buyers.

It’s important to remember this when looking at homes. The homeowner who repaints the exterior of a house to increase curb appeal understands first impressions. So too does the staging company that comes in to rearrange furniture and add accessories to a room.

The goal is to make people viewing the house feel welcome and, well, at home. Of course, the furniture and accessories that make up the bulk of your first impressions won’t be part of the house sale in most cases- and they may distract you from flaws that the house may have.

First Impressions and Home Buying Pitfalls

There’s nothing wrong with sellers trying to make their homes as attractive to buyers as possible. The danger is that your first impression of a house could influence your decision to buy or not.

Curb appeal, or how attractive a home looks from the street, is a good example. The home may have a fresh coat of paint and planters full of flowers by the front door, both of which improve curb appeal. Both features, however, really aren’t that important when choosing a home.

Sure, fresh paint is nice, but it doesn’t influence a house’s structural integrity or floor plan, both of which are more important considerations than the exterior paint. Potted plants are a lovely touch, but easy to replace, and not as important as well-established flower beds and other permanent landscaping features.

Similar dangers occur inside the house. People tend to take in the overall “feel” of a room when they should be looking at the room itself. Furniture and decorations can distract from checking the level of the floor or the size of the room. A finished family room in a basement is a bonus, but could mask cracks in the foundation.

In other words, when looking at homes be aware that, as with people, first impressions are important, but can also be deceiving. Before you choose your home be sure that you’re looking past the curb appeal and décor.

Finally, don’t skip the home inspection and feel free to ask your real estate agent for an opinion on the home. We’re here to help.

Tips to find amazing used furniture deals online

The real estate industry likes to call homes for sale, if they’re not new-builds, “existing homes.”

In reality, they’re used homes, sometimes gently used and, sadly, other times they’re used and abused.

The same goes for cars and anything else that is on the resale market. Yes, there’s a lot of junk out there, but there are often amazing deals on items in as-new condition.

If you’re thinking of refurnishing a room or two this summer, don’t overlook used furniture and start your shopping online.

We’ve rounded up some tips to get you started and to keep you safe while making your purchases.

You’re not alone

Nearly half of Americans shopped for resale items during the pandemic last year, according to OfferUp.com’s Recommerce Report. The category producing the most growth was home goods.

“The average American saved $400 in 2020 by shopping for furniture and home goods on resale marketplaces, and just shy of one in ten saved over $1,000,” according to the report.

Although many Americans have reverted back to in-store shopping, others have stuck to their pandemic routine of shopping online and opting for curbside pickup or having items delivered.

Whether your goal is to save money or you’re looking for something that you can’t find in local furniture stores, online resale shopping is fun, convenient and thrifty.

Where to point your browser

To get the most bang for your buck, visit local platforms and apps that offer in-person transaction service. Even with the price of gas what it currently is, you’ll still pay less to pick up a piece of furniture from the seller’s home than to have it shipped from across the country.

Some of the resale platforms that offer local search include:

  • OfferUp.com (easiest way to shop is to download the app. Set search parameters to “Local pickup only”)
  • Facebook Marketplace
  • NextDoor.com
  • Craigslist.org
  • Ebay.com (click on the word “Advanced” next to the blue search button on the right side of the page. Scroll down the page to the “Location” box and set your parameters)

Other sites offer resale furnishings and accessories and, depending on the seller, you may get free shipping.

Tips for buying home furnishings online

Unfortunately, cybercrime is real. Fortunately, online shopping scams aren’t high on the list of crimes. Investment and romance scams take the top two spots.

It’s still important to protect yourself while shopping online. Look closely at the photos of any item you’re interested in. If you’d like additional photos, contact the seller. If you have questions, get them answered to your satisfaction before committing to the purchase.

When working with local sellers, be mindful of online buying etiquette and safety. Plan to meet in a busy, public spot.

Show up on time for your appointment. If you can’t make it, give the seller as much advanced notice as possible.

Shopping online for furniture and home décor accessories can save you a lot of money. Be smart, stay safe and happy decorating!

Meet 2022’s Plants of the Year

It’s that time of year when the National Garden Bureau (NGB) releases their “Year of the” plant list.

On this list you’ll find “… one annual, one perennial, one bulb crop, one edible, and one shrub,” according to the editors at the NGB.

How did the plants make this prestigious list? By being “… popular, easy-to-grow, widely adaptable, genetically diverse, and versatile.”

Today, we’ll take a look at 2022’s indoor plant, outdoor plant and edible plant of the year.

Year of the Peperomia

(Peperomia spp.)

The genus Peperomia offers a wide variety of choices for both indoor growing and outdoor (depending on climate). From the succulent, trailing string of turtles (Peperomia prostrata) to the spicy scent of the cilantro peperomia (Peperomia maculosa), choosing just one is challenging.

Their popularity extends far beyond scent and novelty, however. Native to tropical forest understories, peperomia doesn’t require a lot of light, so they make ideal office companions or to add a spot of life to a shady corner of the home.

In addition to the two previously mentioned, popular species include (Peperomia elongata), watermelon peperomia (Peperomia argyreia) and the baby rubber plant (Peperomia obtusifolia).

Species considered “rare” can be pricey but you’ll find less expensive peperomia online and at nurseries and gardening centers.

Although most commonly grown indoors in the U.S., some species are fine outdoors and hardy to United States Department of Agriculture (USDA) zones 10 through 12.

Year of the Gladiolus

Plant the corms in spring and have gorgeous spikes of blooms by summer. What could be easier?

Along with their grandeur and beauty, however, glads have a lot to offer the landscape. The grandifloras (Gladiolus grandiflora), the most popular hybrid, can grow to 4-feet in height, “… 12 to 20 blossoms per stem,” according to the editors at the National Garden Bureau, online.

If you crave fresh flower bouquets, this is the plant for you.

These beauties are hardy to USDA zone 7.

Year of the Salad Greens

Ever feel particularly amorous after eating a salad? There’s a reason for that. Salads, at one time in history (the 1500s), were considered aphrodisiacs, according to the editors at the National Garden Bureau.

The editors’ choice of salad greens as their edible plant of the year, by the way, isn’t restricted to lettuce. The group also includes:

  • Arugula (Eruca vesicaria): Fast-grower. Plant in early fall or early spring.
  • Dandelion greens (Taraxacum officinale): Get to those leaves early because they develop bitterness once the plant flowers.
  • Endive (Cichorium endivia): This plant’s favorite temperature range is 60 to 65 degrees Fahrenheit.
  • Kale is formally known as Brassica oleracea. This is one plant you won’t have to worry about in winter as the leaves actually become tastier after a cold snap.
  • Mustard greens (Brassica juncea; B. rapa): These plants grow quickly, so you’ll be populating your salads with them within four weeks of planting.
  • Radicchio (Cichorium intybus var. foliosum), also known as Italian chicory, offers a pop of deep, rich red to the vegetable garden. It thrives in the fall and spring garden.
  • Spinach (Spinacia oleracea) is a cool-season crop. From planting to harvest is typically within 45 days of planting.
  • Lettuce (Lactuca sativa) is considered a cool-season crop but it’s easy to grow and you’ll have fresh salads all winter long.

To read the rest of the list, visit ngb.org.

The nuts and bolts of the home inspection

A good home inspection report is a valuable resource — not only during the home buying process, but also as a guide to maintenance when you own the home.

Home inspection reports can be difficult to decipher, but it is vital that you thoroughly understand everything in the report and the inspector’s recommendations.

Types of Home Inspection Reports

Home inspectors produce different types of reports. Some home inspection reports are checklists pertaining to specific areas of the house. Some are narratives, detailing what the home inspector found as he or she went through the house. Some are written in plain English, while others use symbols and icons that the reader has to decipher.

No matter the format, a home inspection should provide a detailed description of the home’s features. “Damage to door lintel” isn’t as descriptive (or as useful) as “some scuff marks on door lintel with splintering on left side,” for example.

Some home inspectors tend to give a home’s negative features more attention than its positives. Make it clear you want the home inspection report to list the good along with the bad. You’ll be better able to judge the state of the home if the report includes the positives as well as the negatives.

Who Reads Home Inspection Reports?

Homebuyers aren’t the only people who read home inspection reports. Lenders may require a home inspection report in addition to the appraisal.

If you decide to exercise your right to walk away from the deal due to the findings of the inspection, you’ll need to share the report to get your earnest money deposit back.

Depending on state law, real estate agents representing both buyers and sellers sometimes receive a copy of the report. Depending on negotiations, buyers may allow the seller to also see the report.

Evaluating Home Inspection Reports

If at all possible, accompany the home inspector during the inspection. This allows you to ask questions and get a better sense of the condition of the house than if you rely on the written report alone.

Questions to consider as you look over the home inspection report include:

  • Are the problems with the house reflected in the asking price?
  • Are the problems significant enough to rule out buying the home?
  • Does a problem require immediate attention or can it be fixed in the future?
  • Do you need more information on a problem?
  • Is a problem minor or major?

Often, reading a home inspection report generates more questions than you had to begin with. Your home inspector should be willing to provide you with more information on the nature of specific issues.

Home Inspection Reports after a Sale

Hold on to your home inspection report after you purchase the house. A thorough report may contain up to 20 or more pages, detailing items that need adjustment, service or cleaning. The summary punch list, detailing the inspector’s concerns, is a valuable reference for future home maintenance needs.

We will be with you every step of the way to the purchase of the home so don’t hesitate to ask questions about the inspection, the report or anything else pertaining to the transaction.

Roof problems don’t need to keep you from the house of your dreams

There is no such thing as a home in perfect condition. This includes newly-built homes.

Surprised?

The folks at Scott Home Inspection in Colorado have compiled an online list that highlights the most common defects in a newly constructed home. The list includes some pricey items, such as “… improperly installed heating and air conditioning.”

One of the costliest home repairs or replacements is the roof. How costly? A new roof can cost between $10,000 and $15,000 Gregory Kyler, custom builder and licensed general contractor tells Jami Farkas at yahoo.com.

A roof’s average lifespan is 50 years if it’s constructed of “Slate, copper and tile …,” according to Geoff Williams and Teresa Mears at money.usnews.com.

You’ll get about half as many years of life from a roof constructed of fiber cement shingles and 30 years from a shake roof.

Naturally, these life expectancies depend on weather and natural disasters.

So, what happens when you’ve fallen in love with a house, put in an offer and the home inspector raises red flags about the condition of the home’s roof?

Don’t throw in the towel. There are things you can do to save the deal and not be out of pocket for the work that needs to be done.

Renegotiate the price of the home

Your first step is to obtain a bid for the roof work that needs to be done. Ensure that you hire a licensed roofing contractor to supply you with the bid. Check a contractor’s license status by following the instructions at roofonline.com.

Deduct the bid price from the amount you offered on the home. Your real estate agent will submit an amended purchase agreement to the seller’s agent. Then, it’s a waiting game.

If the seller agrees to the lower price, celebrate! If not, and you have the money, perhaps the sellers will split the cost.

If you have wiggle room in your loan preapproval amount, consider adding the amount for repairs into your mortgage. This will require increasing your offering price.

It’s a far from ideal scenario, however. Will the home appraise for that amount?

Renegotiate the terms of the contract

If you know that the purchase price reduction request might be a deal breaker for the seller, get together with your agent and pore over the contract terms.

Perhaps the seller will be amenable to paying for the roof repair or replacement before the close of escrow. Another method used is for the seller to place that amount of money in an escrow account so you can use it to pay for the roof work after closing.

The latter may raise issues with the lender, who may want a roof certification before releasing funds for the purchase.

Roof problems listed in the home inspection don’t have to be a deal breaker. Once the sellers are informed about them they will need to disclose them to any buyer that comes along after you and will face the same requests that you are making.

Don’t give up! We will negotiate for you and win you that home.

Be a rebel and break those area rug “rules!”

Bob Vila claims that there are “9 rules of area rugs that everyone should know.” House renovator Jenell Beals at Houzz.com claims that there are 11 rug rules. We say “rules shmules,” and remind you that some rules were made to be broken.

Some of them just don’t fit when we’re attempting to put a personal stamp on decorating or updating the appearance of our homes. And, area rugs can add that personal stamp, even if you have to break the “rules” in choice, size and placement of them.

Let’s break some area rug rules

Rule #1: Scale Matters

Absolutely; this is true in almost all cases. Rugs often convey the overall size of a room.

But that doesn’t mean you can only choose carpet that covers the entire room. You can still look at smaller rugs that help to discern between the different activity spaces within a room or open plan space.

Rule #2: Furniture Legs Must Be on the Rug

It’s true that this often looks the best in a smaller room with carpet. But, it’s not a hard-and-fast requirement.

Consider just the front feet, or, just the front feet of the couch while the armchair legs are all on the area rug. Think of this as more of a guideline that helps you to choose the right size rug for a room.

Rule #3: Runners Are for Hallways

Yes, runners are perfect for hallways, but they can add depth to bedrooms when placed at the foot of the bed and in long, rectangular living spaces. In general, you will want to use larger runner rugs to get the right effect, but you can use runners in any room.

There are a few more rug rules you might want to break. Those include the use of patterns that contrast slightly with your furniture and window treatments, layering area rugs and adding rugs to rooms with wall-to-wall carpeting.

But there is one area rug rule you should never break: take measurements of your room before shopping for your area rugs. And don’t forget to take color swatches with you when you head out to the stores.

Get additional tips from area rug rulebreakers online at WilliamsonSource.com, ApartmentTherapy.com and PaulaBergDesign.com.

 

Can you use your 401(k) to buy a house?

Want to buy a house but you’re short on cash?

If you have a 401(k) (an employer-sponsored retirement plan), read on to learn how it can help you get into the home of your dreams.

First, remember the purpose of that 401(k)

It’s called a “qualified retirement plan” for a reason – it is a cushion to use when you leave the work world and settle into retirement.

It needs to be a rather large cushion too, we might add. “On average, Americans believe they need $1.7 million to retire, …” according to Jessica Dickler, citing a recent survey from Charles Schwab at cnbc.com.

A more accurate way to determine how much income you’ll need each month is by dividing your estimated annual expenses by 4%, according to Jean Folger at Investopedia.com.

“So, for example,” she explains, “if you estimate you’ll need $50,000 a year to live comfortably, you’ll need $1.25 million ($50,000 ÷ 0.04) going into retirement.”

There’s a lot to consider when you’re thinking about raiding those funds to pay for a down payment and closing costs for a home. And, although we’ve researched the issue, we aren’t finance professionals, and we urge you to consult with one before making a decision.

Should I withdraw the money or borrow it from my 401(k)?

Keep in mind that “Every employer’s plan has different rules for 401(k) withdrawals and loans, …” warns the experts at fidelity.com. “… so, find out what your plan allows,” they conclude.

Many plans offer the owner the choice of withdrawing the funds from the 401(k) or borrowing them. Both methods of getting your hands on the money have advantages and disadvantages.

“When done for the right reasons, taking a short-term 401(k) loan and paying it back on schedule isn’t necessarily a bad idea,” according to Troy Segal at Investopedia.com.

In essence, you’ll be borrowing the down payment for the home from yourself, and you’ll need to repay that loan, with interest, within 10 years.

Withdrawing the money from your retirement plan brings with it some distinct disadvantages. “Taking money out of a 401(k) plan before age 59 1/2 often results in taxes and penalties,” cautions Rachel Hartman at usnews.com.

This will happen if you’re younger than age 59. You will pay taxes and a 10% penalty upfront.

One advantage of requesting a withdrawal, however, is that there is no requirement to pay back withdrawals, according to the pros at fidelity.com.

Borrowing the money from your 401(k)to help you buy a home allows you to skip paying the taxes and penalty, but you will have to pay interest on what you borrow.

“Depending on what your employer’s plan allows, you could take out as much as 50% of your savings, up to a maximum of $50,000, within a 12-month period (fidelity).

Before you make a decision on either of these 401(k) options, consult with your financial advisor. Most professional advisors “… recommend borrowers tap their 401(k) funds only as a last resort,” claims Gina Freeman at themortgagereports.com.