Should I borrow from 401k to purchase Bay Area home?

[Aaron Gomez]

I have a sizeable 401k but my Bay Area rent is putting a damper on my ability to save quickly. I'd like to buy here and potentially house hack, but it seems as if I'll be saving for years if I rely on only my savings, whereas I could use my 401k to get over that huge hurdle. It really feels like the down payment is the barrier to entry, not the monthly payments.

Nothing is 100% sure, but it seems most likely that the stock market (and thus 401k) will take a sizeable dip soon whereas SF real estate will be minimally impacted - therefore this problem will be drawn out for many more years if I don't act soon.

For someone who is very financially stable but simply unable to get past that barrier to entry - is it a good idea to borrow from one's 401k to get into the market? 

[Jonathan James Look]

@Aaron Gomez

Fellow Bay Area resident and REI investor here. Run through the home affordability calculators online. After a down payment, consider your monthly payments: will you have enough savings to cover 6 months of PITI?

Your max 401K loan is limited to $50K or 50% of your 401K, whichever is less. That's nothing towards a down payment for a Bay Area home.

My suggestion would be to hunker down, reduce spending where you can, find roommates, or move to a cheaper place. But if you locked in a decent rental rate, rent control will work in your favor as a renter.

Consider this: buying a home, in the long run is cheaper, assuming you don't move for a long time. If that's you, great, but consider this: the average American moves every 7 years, and home buying calculators usually tell me its cheaper to rent... (Assuming you invest your savings well)