Difficulty with 401k Withdrawal

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    Hello NACA Family,

    I would like to first say that without this forum I am pretty sure I wouldn’t be as far in the process as I am now and for that I am forever thankful to all of you! 🙂

    The issue I’m having is that I am unable to withdraw funds from my 401k with the paperwork that I was given. I thought the P&S agreement would be enough but they stated they needed a Loan estimate so I then provided them with the Loan Estimate. They then stated that since the estimated cash to close is a negative number and Down Payment/Funds from Borrower was 0 they were unable to release my funds. I emailed my mortgage counselor yesterday to see if he can give me an updated loan estimate to include Down Payment/Funds from Borrower but I have not received a reply back as of yet.

    I really don’t know what to do at this point and at wits end and fear this will cause a delay. Has anyone else experienced this and if so how did you resolve?


    Hello NacaPhillyBuyer,

    What to the written rules of the 401k plan actually say regarding withdrawals? Unless this is one of those extremely rare cases where the 401K has abnormally strict rules about it, I suspect somebody there doesn’t want to be bothered actually helping you.

    Contact the plan administrator and try again. If they say no, demand a printed copy of the rules and regulations for your specific 401k plan with the section highlighted that specifically states why they cannot help you. Go over the head of the person you have been talking with. In other words, don’t take no for an answer.

    What most people don’t realize is that every 401k plan has its own set of rules and regulations regarding such things, and while they are generally pretty consistent, there are always going to be a few that vary from the norm and are harder to work with. So either you have a rep that doesn’t want to actually do their job and help you or you have an extremely restrictive 401k plan.

    You are going to have to dive in with the plan administrator and make them either help you or prove to you why they can’t. Just saying no doesn’t cut it.

    Tim Trumble
    Online Operations, NACA

    • This reply was modified 2 years, 5 months ago by TTrumble.

    @NacaPhillyBuyer I am in the same boat as you. I was hoping to use the Wells Fargo Neighborhood Lift grant but it looks like I will be unable to use that since I recently read that you can’t use a mortgage broker with that grant. So I will have to withdraw from my 401k, which I didn’t want to do because withdrawing that money will count as income for tax season next year and will put me in a different tax bracket and I will end up owing more in taxes next year. Sorry, just venting a little lol. All that to say, the company with which I have my 401k (Fidelity), is telling me basically what you said. That I need proof that the money I am withdrawing is going toward the purchase of my home. I am doing new construction and my home will not be ready until November. So my final contract and settlement will not be done until then. I do not have any documentation right now stating how much I will be putting towards my buy down. So they will not approve me to withdraw MY money (craziness!). So I need serious help in this situation as well. Hopefully @ttrumble can chime in with his wonderful wisdom and sage advice:)


    @ttrumble Just seeing your reply! Thank you and I will take heed to your advice for @NacaPhillyBuyer and try talking to someone higher up at Fidelity to get better answers considering the amount I want to withdraw is well below my current withdrawal limit. I really need to do a buy down and it’s looking like this is the only option for me.


    Hello @DCL822, it’s sort of a relief to see I’m not the only one in this situation. I really hope it works out for us both in getting the answers needed! 🙂

    Thank you so much for your response. I called them yet again (VOYA) and they directed me to what they need as far as acceptable documentation, which I listed below. They also stated that these guidelines are not specific to the company I work for but these are IRS guidelines and there is no way getting around that. As you can see below they are requesting that I show the down payment amount.

    Here is what they deem as acceptable documentation
    Acceptable Documentation:
    If borrowing, you must provide a good faith estimate from lender, and
    Signed purchase contract or intent-to-purchase agreement
    The documents must:
    Be dated within last 60 days, and
    Reflect the address of the residence being purchased, and
    Reflect the purchase price, and
    Reflect the amount of the down payment, and
    Reflect a closing date no more than 6 months in the future, and
    Reflect signatures of both buyer and seller

    If building, you must also provide a copy of the signed builder’s permit or builder’s contract
    If purchasing a mobile home, you must also provide a copy of the Deed to show that you own the land

    Unacceptable Documentation:
    Rental/lease agreement for purchase of a primary residence
    Mortgage applications
    Truth in lending disclosures
    Bills already paid
    Land purchases only
    Mortgage payments


    @DCL822 If you get a loan from your 401K, you won’t be taxed on that unless you leave your job before you repay the loan. if It’s for your primary home, you can get the loan for 30 years repayment plan.

    Also, why are you trying to withdraw the money now? You will get updated documents later showing a better idea of how much money you will need at closing so you can provide that to your plan administrator. However, you need to withdraw the money the latest possible, right before closing. For now, for qualification purposes, you can just write a letter of explanation indicating that your intention is to withdraw money from your 401K and provide the 401K statement and probably repayment plan


    @southflorida I thought I had to have all funds needed before submitting the bank application, no? I am in the Credit Access stage now (with conditions unfortunately) and wanted to make sure I didn’t create any delays. The funds I am withdrawing are for buy down only since I already have my MRF.


    @southflorida I was told by my MC that if I am using money from my 401k for a buy down it has to be liquid in my account before BOA will approve my loan application. I was told I could not wait until closer to my closing date in November. Also, I wanted to do a withdrawal instead of a loan because I was under the impression that a 401k loan would alter my debt calculations for NACA and lower my approved PITI. I was not aware of the possibility of having a 401k loan spread over the course of 30 years for a home purchase. I will ask Fidelity about that when I call to inquire about the specifics of the withdrawal. I also know that if the 30 year repayment is an option, if I were to ever leave my job before the end of the 30 years (which is highly likely), the remainder of the loan would be due in full.


    oh, your MC may be right about having the funds in your bank account before Bank Application. In my case, I was already in bank application and I sent them my 401K statement showing that I had that money available if I needed it because they were saying I was going to end up with no money after closing, but in your case that you need the money for buy down, it’s true that you need to have it in your bank account by the time of the bank application



    Just wanted to check in with you. Were you able to work out the paper work issues and withdraw funds from your 401k?



    Unfortunately not as of yet. 🙁



    Sorry to hear that:( I hope everything works out. I’m preparing for my battle with Fidelity.



    Keep us updated on your progress!


    I just received word that I’d also need the amount of the down payment to take out a withdrawal. Please keep us updated.


    I received an updated Loan Estimate directly from BOA that included the buy down amount and from there I was able to get the funds needed from my 401k.

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