We were financially set back several years ago, due to my husband getting injured at work and previous child support. We have most of our bills paid up. But we are living in a 2-bedroom trailer with 4 children including two teenagers. We can't get a loan without cleaning more of the credit up and a down payment. We need to use some of our 401k plan. How do we go about this? I know that this should be the last resort. But have absolutely no other solution. With gas prices and insurances we just cannot save enough fast enough. Our vehicles are each 8 years old and will need to be replaced soon. We don't want to use all of it, just enough for a partial payment.

I am assuming that you wish to do an early withdrawal from a 401-K to pay off some delinquent credit and provide money for a down payment on a home; is that correct? I am not all that familiar with the rules of early withdrawals. Your best bet would be to check with the administrator of the 401-K, and see if a withdrawal, or perhaps a loan from the 401-K would be best. The first step is to get your credit up to snuff. Either pull your free Credit Report from all three bureaus from www.annualcreditreport.com/cra/index.jsp , or have a mortgage broker/banker pull it. Be sure to get a mortgage person who will not shaft you. If either of you are a Veteran you can buy with no down; on FHA with 3% down; Conventional "My Community Mortgage" with as little as zero down. FHA and VA are more workable on credit, while Conventional seems more flexible on debt ratios. Vague answers are the best I can provide with the information at hand.

Most plans offer loans against your 401k instead of doing a withdrawal.