A senior economic adviser to Donald Trump has revealed details of a proposed housing policy that would allow individuals to use funds from their 401(k) accounts for home down payments. The plan, part of a broader initiative to boost homeownership, aims to address affordability challenges in the U.S. real estate market.
- Up to $35,000 in 401(k) funds could be withdrawn for down payments without penalty
- Repayment of withdrawn funds allowed within five years to avoid tax consequences
- Targeted at first-time homebuyers in high-cost housing markets
- Projected to enable 2.8 million additional home purchases over five years
- Proposed alongside fixed-rate 30-year mortgage incentives
- Requires congressional approval and is slated for formal announcement in 2027
The proposed policy, disclosed by a senior economic adviser to former President Donald Trump, would allow qualified individuals to withdraw up to $35,000 from their 401(k) accounts without incurring the standard 10% early withdrawal penalty for down payment purposes. This provision would apply to first-time homebuyers and could be accessed once every 12 months. The adviser noted that the plan is designed to increase access to homeownership for middle- and lower-income Americans who face significant barriers due to limited savings. The initiative aligns with Trump’s broader economic platform focused on deregulation and individual financial empowerment. Under the plan, withdrawals would remain subject to income tax, but contributors would be allowed to repay the withdrawn amount into their retirement accounts within a five-year window. If the repayment is completed, the amount would not be considered a distribution for tax purposes. The adviser emphasized that the policy seeks to reduce reliance on traditional mortgage lending and encourage long-term asset building through homeownership. According to internal projections cited by the adviser, the policy could potentially enable up to 2.8 million additional households to purchase homes over a five-year period, particularly in high-cost markets such as San Francisco, New York, and Seattle. The plan also includes incentives for lenders to offer fixed-rate mortgages with terms up to 30 years, aiming to stabilize housing costs and reduce default risk. The proposal has drawn early reactions from financial institutions and real estate groups. Mortgage servicers have expressed cautious optimism, citing the potential for increased loan volumes, while retirement planning advocates have raised concerns about long-term retirement security. The policy would require congressional approval and is expected to be formally introduced in early 2027 if Trump secures the Republican nomination.