Kevin's Thoughts:

1. Borrowing against your 401(k) for the down payment - The process would simply entail working with your 401(k) administrator and arranging for the loan. For qualifying purposes, we would not count the payments against you, and we would have a solid down-payment for a purchase. The advantage with this process is that you would not have to pay taxes or early withdrawal penalties. You would also still be paying a payment back to yourself and have your long-term retirement funds in place. You will not be earning with the market should we go back up, but you will be paying yourself a small amount of interest. The drawback is that you will have the 401(k) payment.
2. Taking Money Out of your 401(k) for the down payment - Once again, contact your 401(k) admin and let them know that you will be pulling funds. We figure about 30% tax and early withdrawal penalty on this money. The advantage to this strategy is that you will have money in your home post-tax and will not have to pay yourself back. The down-side is that you will be paying for tax and early withdrawal.
3. Using 401(k) to buy cash - If you have enough in your 401(k) and want to purchase a property for cash, you can go to Pensco and set up a self-directed IRA. This is a great way to buy Real Estate as part of your investment strategy. There are some very strict rules to using Self-Directed IRA's to purchase Real Estate...the main one is that you cannot live in it. There are special rules particularly for Defined Contributions...401(k) and Pensco is a great site to direct you in this area. Clearly, this is a more stringent process but a great tool. 

During the last decade, Adjustable Rate Mortgages (ARMs) have increased in popularity among consumers. These days, few homeowners (especially first-time buyers) remain in their homes for more than seven years. In this case, it often makes sense to get an adjustable rate mortgage with a lower rate, especially one with a 5-year or 7-year fixed portion, since they won't have the loan long enough to be concerned about rate fluctuation.