Using 401K funds for a downpayment? First, consider the tax implications.

As downpayment requirements increase, anecdotally, home buyers are tapping 401K plans for extra cash. Classified as a "hardship withdrawal", loans against your retirement funds can be cheap and simple.

1. There's no credit check or approval process
2. There's only a small set of paperwork
3. Money can be available in as little as a day

But just because you can get access to your retirement money doesn't mean that you should. 401(k) withdrawals should only be made after careful consideration. There are some serious negatives, specifically with respect to taxation. If you open a 401(k) loan and don't repay according to the loan terms, the withdrawal ends up getting taxed as income, plus a 10 percent penalty for people under 59 1/2. That's a stiff penalty. But, even if you do repay the loan on time, you're still getting leaving yourself subject to double-taxation.

• Taxation #1 occurs when the loan is repaid using post-tax dollars
• Taxation #2 occurs upon final withdrawal at retirement

Furthermore, when you borrow against a 401(k).....

To read the rest of this mortgage industry blog, or to begin your mortgage loan approval, visit:

http://www.loanapproval411.com/info_01/page_1.rad