Saving for a down payment has become one of the biggest barriers to homeownership, especially as higher home prices and mortgage rates stretch household budgets.
That pressure has many would-be buyers asking whether retirement savings can help bridge the gap — and whether the rules around using them may soon change.
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Can I use my 401(k) to buy a house?
Yes, you can use money from a 401(k) to help buy a house, but only in limited ways, and often with meaningful tradeoffs. Under current rules, most buyers access their 401(k) either through a loan or a hardship withdrawal.
Both options can provide cash for a down payment or closing costs, but they may come with taxes, penalties, or long-term consequences for your retirement savings. Even so, borrowing your own nest egg money is a common solution. According to a 2024 Zillow consumer survey, 24% of homebuyers tapped into retirement funds to help finance their down payment.
What might be changing with penalty-free 401(k) down payments
Recent reports indicate the Trump administration is drafting an executive order that could allow buyers to use 401(k) and other retirement funds for home down payments without facing early-withdrawal penalties. Supporters argue that individual savers should have at least as much flexibility as institutional investors.
Sen. Josh Hawley (R-Mo.) said in a January 7, 2026, post: “For years, Wall Street has used your 401k money to buy single-family homes. We should ban them from doing it — but allow you to use your 401k to help you buy a home, without penalties or caps or taxes.”
If implemented, such a move could significantly lower the upfront cost barrier for some buyers. Until any executive action is finalized and implemented, existing 401(k) rules remain in place.
How to evaluate affordability before touching retirement savings
Before considering a 401(k) loan or withdrawal, it’s wise to step back and assess whether using your retirement funds actually improves your overall buying picture.
HomeLight’s Home Affordability Calculator below can help you estimate how much home you may be able to afford based on your income, debt, down payment, and other costs.
In some cases, you might find that adjusting your expectations — such as targeting a different price point or timing your purchase differently — can reduce or eliminate the need to tap your retirement savings at all.
If you’re unsure how these numbers translate in your local market, connecting with a knowledgeable real estate agent can make a meaningful difference. HomeLight’s free Agent Match platform can connect you with a top-rated local agent who understands pricing, strategies, and buyer assistance programs in your area.
When using a 401(k) might make sense (and when it’s risky)
There are situations where buyers consider using a 401(k), such as when they have a stable job, strong long-term retirement savings, and a clear plan to repay a loan quickly. Even then, many financial professionals urge caution.
Using a 401(k) becomes especially risky if it leaves you with little emergency savings, ties your housing plan too closely to your current employer, or significantly disrupts long-term retirement growth. For many buyers, the downside isn’t obvious until years later.
A local agent or financial advisor can help you pressure-test these scenarios. An experienced agent can also point out alternatives you may not have considered, such as homes that qualify for lower down payment programs or neighborhoods where prices stretch your budget further.
Other ways buyers fund a down payment
A 401(k) is not the only down payment option available to buyers. Depending on your situation, alternatives may include:
- Loan programs that require a lower down payment
- State or local down payment assistance programs
- Use gift funds for part or all of your down payment
- Structuring an offer that prioritizes affordability over competition
- See our Guide to the Best First-Time Home Buyer Programs
In addition, many IRAs allow penalty-free withdrawals of up to $10,000 for a first-time home purchase. This exemption typically applies only to the 10% early-withdrawal penalty, not income taxes, and there may be a lifetime limit per person. The rules also differ between Traditional and Roth IRAs.
The bottom line: You can use a 401(k) to buy a house
Yes, you can use a 401(k) to buy a house — but under current rules, it’s often a last-resort option rather than a first choice. While proposed policy changes could make retirement funds more accessible for homebuyers in the future, they don’t eliminate the need to weigh long-term financial consequences.
For buyers feeling stuck between rising costs and limited savings, the smartest next step is often clarity — understanding what you can afford, what options exist today, and how a local expert can help you move forward with confidence.
To learn more, visit HomeLight’s Buyer Resource Center, where you can search for answers to all your homebuying questions.
Editor’s note: This post is for educational purposes only, not financial advice. Before tapping retirement savings to buy a home, consider speaking with a financial advisor and exploring alternatives that may better protect your long-term goals.
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