Purchase by Self-Directed 401k, but the loan is in my name?

[Hjiorst Fjioords]

I am pre-qualifying for a real estate loan for my self-directed 401k.  This is the first purchase I've done this way.  The loan broker tells me that the loan will have to be in my name, even though the purchase can be made by the SD 401k trust.

Amongst the rules for SD trust investing are that the only the trust may pay for the property, with no outside money coming from me or anyone else.  No co-mingling.  I have enough in the trust to cover all expenses and down payments, but I am concerned about the loan being in my name.  

Has anyone else done it this way?  Is this normal? 

Not asking for legal advice, just checking to see if anyone else has done this in this way, or knows of someone who has done it this way.

Thanks!

[Brian Eastman]

@Hjiorst Fjioords

You need to look for a different lender.  Per IRS rules, you may not provide an extension of credit to your 401(k) plan.  For you to be named as the borrower or pledge a personal guarantee on the loan would be an IRS prohibited transaction.

There are several non-recourse lenders that work with IRA and 401(k) retirement plans. Reach out to:

First Western Federal Savings

North American Savings Bank

Solera National Bank

Titan Bank of Dallas