When the real estate market is spiraling downward like it is now, opportunity-seekers start to rise. These are individuals with good desires and upright intentions—and probably a little bit of capital—wanting to not only help shore up the breaks in the economic wall but also to maximize the potential business benefits. That’s a necessary quality in people when the economy is down; the ones who go out and buy are the ones who help the national economy recover. In many cases, it is the housing market that both plunges the economy into a hole and later helps it dig itself out. With that knowledge, there are many people seeking opportunity in real estate, and some are bound to ask: can I use my 401k to buy a house?

The ones who ask that question—can I use my 401k to buy a house?—are starting to think along the right lines. When things are down, the ones who succeed are the ones who look at the scattered pieces on the ground and start picking them up and fixing them together to make something fit. The key in that analogy, though, is that they are the ones trying to make something fit. The question can I use my 401k to buy a house? is not one that is answered simply in terms of yes or no.

A 401k account has certain withdrawal rules attached to it. Money accumulates in it tax free, but upon withdrawal, income tax is payable to the federal government. Additionally, any withdrawals before the age of 59.5 incur a 10% penalty of the amount withdrawn. The simple answer would seem, then, to be Yes—with some qualifications.

The only real exceptions to the 10% penalty are for those who are in a Midwestern disaster area and have suffered accordingly. The full exceptions are spelled out in IRS Publication 575; essentially, the IRS is going to insist on the 10% penalty except in documented cases of extreme hardship. Such hardship may sometimes include necessary home repairs, payments to prevent foreclosure, and other end-of-the-line real estate traumas. Some accountants and tax firms will claim that they can help a person withdraw from his or her 401k without incurring the 10% penalty, but anybody asking Can I use my 401k to buy a house? should be wise enough to realize that when talking about the kinds of money associated with 401ks, many helping hands will be eager to say yes and then minimize the qualifications rather than to caution against it.

Nevertheless, that does not mean that a person could not make such a withdrawal—and that’s where company policy comes in. Because it is the employer that ultimately controls the 401k, the employer will already have established guidelines for appropriate withdrawals. Some will permit withdrawals for down payments or for mortgages; others will require a bit trickier of a tax structure by having the employee borrow against his or her own 401k. Whatever the case, asking the question Can I use my 401k to buy a house? is a great place to start in bringing the market back online. You just have to make sure you do it right.