Do Not Raid Retirement for the Down Payment

Every route from a retirement account to a down payment is worse than waiting a year, and the ranking below exists only so you can recognize what you are being sold.

Roth IRA contribution basis

Withdrawable tax-free and penalty-free at any time (section “Retirement Accounts as a Last-Resort Layer”). The cost is invisible and permanent: the shelter space cannot be re-contributed beyond the annual limit, so you have converted decades of tax-free compounding into a larger down payment on a house that was already going to appreciate at roughly inflation.

The $10,000 first-time-homebuyer exception

IRC §72(t)(2)(F) waives the 10% penalty on up to $10,000 lifetime from an IRA for a first home. From a traditional IRA the distribution is still fully taxable, so the waiver saves you $1,000. Against a Tier-1 purchase price this is a rounding error dressed as a benefit.

A 401(k) loan

Not taxable if repaid, and cheaper than it looks since you pay the interest to yourself (section “Borrowing from Your 401(k)”). The defect is structural: the balance generally becomes due when you leave the employer, and unpaid amounts convert to a taxable, penalized distribution. You have therefore linked your housing capital to your job at the exact moment this chapter has been telling you to unlink them — lose the job and you get the mortgage problem and a tax bill in the same quarter.

A hardship withdrawal

Taxable, penalized, and unrepayable. There is no version of this that is the right answer to a house you want.

The pattern across all four is the same: they convert the most tax-advantaged, most liquid, most diversified capital you will ever hold into the least. If the purchase requires one of them, the purchase is too large. Rent for another year, fill the space, and buy the house with money that did not have to be smuggled out of somewhere.