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If you indeed only have two choices, then I would personally pick number 2. It keeps your options open, so even though you lose earning power for a while, you still have a set amount in retirement funds unless all he!! breaks loose and you have to tap your Roth to pay off your 401K. However, are the 401K funds not considered borrowed? Won't the mortgage co have an issue with you borrowing down money? We've always had to show how our money got to the account we used to show we had funds needed, and they had to be seasoned. They look closely for borrowed funds these days, and you may even have to sign a document stating none of your down money is borrowed.

I questioned this as well, but my mortgage broker claims that a 401k loan is ok to use. Frankly, I was surprised.

What is the problem with putting only 10% down?

I was told you can't get a jumbo with 10% down. Otherwise that's absolutely what I would do. The good school district is one goal, but reasonable commutes is an equal one. Unfortunately the towns with good schools and commutes into Cambridge and Waltham also happen to be among the most expensive in the state. We're not willing to go over an hour for the commute.
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