A 401(k) loan can be a legitimate down payment tool. Cashing out almost never is. The difference between the two is everything. A straight distribution before retirement age triggers a 10% early-withdrawal penalty plus ordinary income tax, so a big balance shrinks to a much smaller usable amount by the time you net it out. We'd almost never recommend that. A loan against your 401(k) works differently. You're borrowing from yourself and paying yourself back with interest, with no penalty. And the guidelines are on your side: Fannie Mae, Freddie Mac, and FHA all leave the repayment of a loan secured by your own retirement account out of your debt-to-income ratio, since you'd only be defaulting to yourself. That's a meaningful advantage over most other debt. Weigh a few things before you do it: - Job risk. If you leave or lose your job, the loan balance can come due quickly. Check your plan's terms and think about your job stability. - Opportunity cost. Compare what that money might have earned invested against what the home is likely to do over the same window. - Keep a cushion. Don't drain every dollar in. New houses come with repairs, furniture, and surprises. One honest gut check: if you're genuinely stretched and can't save even as a renter, borrowing your way to a down payment adds risk to an already tight budget. If the lump sum is purely the hurdle, a 401(k) loan is a legitimate tool. Jeb's practical first step: figure out the monthly loan repayment and make sure it fits comfortably alongside the new mortgage.