Borrowing from a 401(k)?

14 07 2004

Many young homebuyers cash out their 401(k) retirement plans and use
the money as a downpayment without considering the negative long-term
consequences: They can be hit with income taxes, a 10 percent penalty
triggered by early withdrawal and the loss of future tax-deferred earnings.
Experts say that even borrowing from a 401(k) plan isn’t a good idea
because the holders of the retirement account lose tax-deferred savings and
risk selling investments before the stock market completely recovers. Instead,
buyers with steady sources of income might want to consider obtaining
piggyback loans, which combine first mortgages for 80 percent of the property
price and second loans to cover the remainder, minus the downpayment.
Those who decide to dip into their retirement accounts even after serious
consideration, should do so only if they can still make their regular
contributions as well as the loan payments.





Know Your Credit Score

14 07 2004

Looking for a mortgage? The Mortgage Bankers Association
(MBA) offers the following tips for securing the lowest rate. First,
determine your credit score, which can vary from a low of 300 to
850 points, from the three primary credit bureaus: Equifax,
800-685-1111 or http://www.equifax.com; TransUnion, 800-888-4213 or
http://www.transunion.com; and Experian, 888-387-3742 or
http://www.experian.com. Generally, there’s a fee that must be paid unless
you have been turned down for credit because of something in a
report. The MBA also recommends bringing credit card balances
down to less than 30 percent of each card’s credit limit, and not to
apply for any new lines of credit. Also keep credit card accounts open
rather than closing some and lumping all debt into a single account.
It’s better to have a number of credit cards with each debt less than the
30 percent limit than it is to have only a single card with more than
30 percent of your available credit used.








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