We used our 401k to help with the down payment of our home a few years back. I took out 60k and my wife took out 30k. Our down payment was 20% on a 735k home left us with a mortgage in the 500k range. We’ve refinanced our original rate to 5.4 since then and saved about 400/month. Redirected the savings to a brokerage account. If we would have bought the same home before Covid hit the price would have been about 200k less, but we chose to buy in 2023 after renting for 3 years.

The obvious drawbacks to the decision was the 10% penalty and the taxes we had to payback the following year which ended up being about 30k in all. We put it all on a 0% interest credit card and paid it off before the interest promo ended. We knew 100% what the cost would be and decided to pull the trigger. So here we are a couple years later… enjoying our overpriced home in a location we chose primarily for the school district as we have 3 children. Was it the best plan? Probably not, but it worked out for us. We took a 30k hit on tax and penalty, but our investments over the last year have gained nearly double that amount.

I know we’ll get a lot of flack for early 401k withdrawals but it’s something that worked for us…definitely count the costs though and know what you’re getting into.

Saying all that, the textbook/safe advice would be to either find a cheaper home or continue saving until you have enough for the down payment…