Oh I love rules and guidelines. This is especially true when it comes to helping more people buy homes. We have mortgage guidelines, real estate home purchase guidelines, credit guidelines, debt guidelines, and a smattering of state and local jurisdiction guidelines. One guideline that many first time home buyers have trouble with is where their down payment can come from.
You may not know this, but one place where you can get your down payment from is your IRA – Individual Retirement Account. What’s even better about this is that you may be able to tap into this pool of money – if you are fortunate enough to have it – without penalty if you are a first time home buyer and meet certain requirements. If this is you, keep reading…
Back in 1997 the US Government enacted the Taxpayer Relief Act which made it possible under certain conditions to tap into a traditional IRA or a Roth IRA for the purpose of buying a first home without penalty. Safe to say, as of 2010, you have a lifetime cap of being able to withdraw up to $10,000 from your IRA as a first time buyer.
I’m not a qualified financial planner or tax preparer so I cannot specifically speak to your situation or tell you definitively what you may or may not qualify for as a first time home buyer with using your IRA for your down payment. But I will tell you, there is definite merit with checking into this program if you don’t have a whole lot of money in your checking account but your IRA does.
Oh, and another possibility…are you expecting to get some money from a parent or relative in the form of a gift for your down payment. If so, you may want to check out the rules about getting money as a gift from parents to put into your IRA. You may find that they can gift you money ahead of the time which would allow you to start or add to your IRA and possibly make some interest in your account while you wait. You never know – some parents have this thing inside them when it comes to helping their kids out with retirement.
