401k question

[Joel Owens]

Hey everyone I do not do residential anymore. A family member is buying a house with 10% down. Their parents are giving 5% down but because it's a conventional loan they are putting down 5%. Conventional only allows a gift of 50% of down payment and not 100% like FHA. Do not want to go FHA for obvious high cost of mortgage insurance and no MI drop later allowed.

They do not have it all in cash but can use their 401k and put the money back in.

2 questions is how long can they have it out penalty free? I think it is 30 or 60 days but not sure. Also they said they have enough to cover the 5% down in the 401k but read somewhere that you can only take out 50% of the total 401 but weren't sure.

If that is the case they will be about 3,000 short of the 5% down needed. The parents can give them the rest above the 5% they are already putting down but I am thinking the underwriter will want those funds seasoned and be asking where they came from.