Quick answer: On a $750,000 Lafayette 80026 home, a buyer with $100,000 saved is $50,000 short of 20% down. A 401(k) loan can cover that gap with no 10% additional tax. Taking the same $50,000 as an early 401(k) withdrawal adds $5,000 in IRS additional tax, before regular tax.
By Katerina Veteskova, Colorado real estate broker license FA.100082955, eXp Realty, LLC
Retirement savings are often the largest pile of money a buyer has. Using them for a down payment is allowed, but the route you pick decides whether the IRS takes a cut.
This guide follows one example: a $750,000 purchase in the 80026 zipcode in Lafayette with 20% down, or $150,000. The buyer has $100,000 in cash and needs $50,000 more.
How much can you borrow from a 401(k) for a Lafayette down payment?
Up to $50,000, if your vested balance is at least $100,000 and your plan offers loans.
The IRS plan-loan FAQs cap a loan at the lesser of $50,000 or the greater of $10,000 and 50% of your vested balance. Repayment normally runs within 5 years in level payments at least quarterly. A loan used to buy your main home may be allowed a longer term, so ask your plan administrator what it offers.
A loan avoids the 10% additional tax because it is not a distribution. The catch comes if you stop paying: a loan in default is generally treated as a taxable distribution of the whole unpaid balance.
What does an early 401(k) withdrawal cost on $50,000?
About $5,000 in additional tax, plus the regular tax you owe on the withdrawal.
The IRS chart of exceptions to the early distribution tax shows the first-time homebuyer exception applies to IRAs, not to 401(k) plans. So a buyer under 59 and a half who pulls $50,000 from a 401(k) pays the 10% charge on all of it. Plans also set their own in-service withdrawal rules.
Can an IRA cover part of the gap without the 10% tax?
Yes, up to $10,000 per person over a lifetime, if you qualify as a first-time homebuyer.
IRS Publication 590-B sets the rules. You must have had no ownership interest in a main home during the 2 years ending on the date you sign a binding contract. The money must go to buying costs or usual closing costs within 120 days of the distribution.
A married couple who both qualify can each take $10,000, or $20,000 together, and skip $2,000 in additional tax. That still leaves $30,000 of the $50,000 gap to cover another way. A traditional IRA withdrawal is still taxed as regular earnings, and IRS Topic 557 confirms the 10% charge applies only to the taxable part.
Pull $50,000 from one traditional IRA instead, and only the first $10,000 gets the exception. The other $40,000 carries the 10% charge, or $4,000.
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Does a Roth IRA work differently?
Yes, because your regular contributions come out first.
Under the Publication 590-B ordering rules, a Roth withdrawal is treated as coming from regular contributions, then conversions and rollovers, then earnings. The 10% charge falls only on the taxable part of a distribution that is not qualified. Ask a tax professional to confirm how much of your Roth balance is contributions before you count on it.
Will a lender accept retirement money for the down payment?
Yes, Fannie Mae lists vested IRA and 401(k) funds as acceptable for the down payment, closing costs and reserves.
Under Selling Guide B3-4.3-03, the lender verifies that you own the account, that it is vested and that withdrawals are allowed regardless of your current job status. Money left in the account can count toward reserves without being withdrawn.
For a 401(k) loan, Selling Guide B3-6-05 lets the lender leave the repayment out of your monthly debts once it sees the loan papers showing the account as collateral. If you also count that account toward reserves, the lender subtracts the loan amount first.
Is $750,000 a realistic price in 80026?
Yes, it sits just under the middle of recent sales.
Redfin put the 80026 median sale price at $759,777 for the three months ending September 2026, with homes selling in around 42 days at 98.9% of list. Those figures cover the whole zipcode, which reaches past Lafayette city limits. Current listings are in the Lafayette homes from $700K search.
What does the loan cost each month once you reach 20% down?
About $4,089 in principal and interest on the $600,000 loan at 7.24%.
That uses the 7.24% average for the 30-year fixed that Freddie Mac published for the week of October 29, 2026. Add your 401(k) loan repayment to that figure when you build your own budget, even if the lender leaves it out of the ratio.
Which retirement option fits your situation?
It depends on your job stability, your account type and whether you have owned a home recently.
Choose a 401(k) loan if:
- Your vested balance is $100,000 or more and your plan allows loans
- You expect to stay with your employer while the loan is repaid
- You can carry the repayment alongside the new mortgage
Choose the IRA first-home exception if:
- Neither spouse has owned a main home in the past 2 years
- The gap is $10,000 per person or less
- You can time the withdrawal to land inside the 120-day window
Choose neither if the only option is a full early withdrawal. Weigh that 10% charge against putting less down and paying mortgage insurance instead. Compare homes near your price in Lafayette homes from $700K, Superior homes from $700K, Superior 80027 homes from $700K and Superior $700K to $1M.
Where else can a $750,000 budget go near Lafayette?
Start with Lafayette homes from $700K, then look east and south to Broomfield homes from $700K and Broomfield 80020 homes from $700K.
Nearby, compare Louisville homes from $700K, Louisville 80027 homes from $700K and Louisville $700K to $1M. To the west, see Boulder homes from $700K, Boulder $700K to $1M and Boulder townhomes and condos from $700K. North of Lafayette, try Longmont homes from $700K. For the wider region, open Front Range $700K to $1M. To total the money due at signing, see Boulder County cash to close, and buyers on a first purchase can start with first home in Boulder County.
Broker view: "When a buyer mentions a 401(k), I ask them to call their plan administrator before we write an offer, because loan approval and payout can take days. Getting the paperwork started early keeps the down payment from holding up the closing date." - Katerina Veteskova, eXp Realty, LLC
What this guide does not cover: Your personal tax bracket, Colorado tax, hardship withdrawals, 403(b) and pension plan details, FHA, VA and USDA rules, mortgage insurance with less than 20% down, closing costs, property tax, homeowners insurance and HOA or metro district dues. A tax professional and your lender can run your own numbers.
Sources: IRS Topic 557, IRS Publication 590-B, the IRS chart of early distribution exceptions and the IRS plan-loan FAQs, all checked November 2, 2026. Fannie Mae Selling Guide B3-4.3-03 and B3-6-05. Freddie Mac PMMS, 30-year fixed at 7.24% in the October 29, 2026 weekly print. Redfin 80026 zipcode housing market page, three months ending September 2026. Dollar figures are my arithmetic from those inputs, not tax advice.
Planning a Lafayette down payment with retirement funds? Call or text 720-646-4685, or request a tour.
Frequently asked questions
Can I borrow from my IRA for a down payment?
No. The IRS says loans are not permitted from IRAs, SEPs or SIMPLE IRA plans. You can take an IRA distribution, and up to $10,000 of it can skip the 10% additional tax if you qualify as a first-time homebuyer and spend it within 120 days.
Does a 401(k) loan payment count as a monthly debt?
Usually not on a Fannie Mae loan. The Selling Guide lets the lender leave the payment out of your monthly debts when it has the loan paperwork showing your 401(k) as the collateral.
What happens to my 401(k) loan if I leave my job?
Your plan may reduce your account by the unpaid balance, which the IRS calls a loan offset. If that happens because you left the job, you have until your federal tax return due date, including extensions, to roll that amount over and avoid tax on it.
Who counts as a first-time homebuyer for the IRA exception?
Someone who had no ownership interest in a main home during the 2 years ending on the date of the binding purchase contract. If you are married, your spouse must meet that test too.
Katerina Veteskova is a Colorado real estate broker (license FA.100082955) with eXp Realty, LLC. Call or text 720-646-4685, or request a tour.