If you plan to use money from your 401(k) to buy a home, you might want to think otherwise, according to financial expert Chris Hogan.
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“It’s a bad idea,” Hogan told FOX Business’ “Mornings with Maria” on Tuesday. “You’re stealing from your future self. You’re causing a lot of penalties to get started.”
A Bankrate financial milestones survey found that Americans believe the ideal age for buying a house is 28.
Hogan says millennials shouldn’t think about buying a house when they’re younger just because they want to act like a responsible adult. If they choose to shop for homes, he says there are a few aspects of their lives that they should assess first.
“Where are you? Where is your career leading you? And where do you want to go?” Hogan said.
According to Hogan, a 20% down payment, or minimum of 10%, is ideal for buying a house.
“So you go in and you have some equity built up, but it’s a long-term decision,” he said.
A solution for not having to dip into your 401(k) to buy a home is to budget and have an emergency fund.
“Save up three to six months of expenses – you’ve got money there – so when life happens, you can go there,” he said.
A recent study from CreditLoan found that millennials are more likely to borrow money from family.
Instead of borrowing from family or your 401(k), Hogan said to focus on budgeting so that in the future you won’t be overwhelmed by debt.
“If you want a bigger down payment – I think that’s great for a home buy – take out a second job, cut back your budget and put that extra down payment down,” said Hogan.