First crack at a purchase has been discouraging.

[John Kernen]

I have been looking for ther right deal for some time now. Dragging a realtor around to every house in town. The market is tough right now but I keep hanging on the thought that if I don't get started I never will. I had a pre approval from a bank, planned take a loan from my 401k to cover some down and rehab costs. I found a house that needs a bit of updating and probably not the best deal as it was on the MLS but at least not a complete basket case for my first deal. I got my offer accepted and started the process. My lender informs me that instead of the 20% down I will have to do 25% because the purchase price (125k)is less than I originally asked for on the pre approval. Ok not a big deal I planned to pull 50k from my 401 for down and rehab. I start to work on pulling the down money from my 401k and find that because this is not my primary residence I will have to pay the loan back in half the time I had expected. This puts me paying back the loan an mortgage at about 1350 a month on a home that should rent for about 900 per month. Don't think this is a good move...I also don't feel that pulling any money from my 401k is a viable option going forward. Very discouraging and I feel bad for wasting the time of those involved. I am still determined to get the first deal. I am in the middle of refinancing my primary home and may look to pull some cash from a HELOC after that settles. Had anyone else had similar issues? Anyone have any creative ideas or suggestions?