One of the things you can take money out of a traditional IRA for is to "pay qualified first-time homebuyer expenses." without paying the penalty on it.

I found a house I like that is at the limit of my price range so to buy it I was going to see if I could shift money from my 401k to a traditional IRA and use it for closing costs and points on the mortgage.

Now, does anyone know if buying points would qualify?
Also, this is just for the 10% early withdrawal penalty, you still have to pay standard income taxes on it right?

If you have to raid your retirement accounts to fund your home purchase, it's time to do a gut check about whether or not you can afford the home.

Raiding your retirement to buy points, in my mind, is a really stupid idea. What if you need to move in a year? Or you want to refi? You've just hurt your retirement, paid taxes on that money, and then flushed it down the toilet.

If you are that concerned about keeping your payments low you are in for a nasty surprise. Homeownership has more costs than just the mortgage. What are you going to do if your furnace craps out? I suppose we'll read about you as CNN's next real American Hero.

ilikecheese said:If I could use some of my 401k to buy points and lower my rate on the loan w/o having to pay a penalty, why shouldn't I?Here's why.