Most of us know that if you withdraw funds early from your IRA you pay a 10 percent penalty. Current withdrawal age is 59.5 years old. But first-time homebuyers have an exception available to them. They are allowed to withdraw up to $10,000 per person, penalty free, if they did not own a home in their previous two years.
Using this rule, a married couple with IRA accounts each, could take out their lifetime max of $10,000 a piece to use as down payment to purchase a home penalty free. It could even be used to pay closing costs. Another thought is using it as down payment so you can qualify for a loan with PMI or mortgage insurance.
Keep this in mind. If you do qualify to make a penalty-free withdrawal: you may still owe taxes on the amount withdrawn from your IRA. However, a withdrawal from a Roth IRA account will not have tax due since it is after-tax dollars.
You may also perform a withdrawal in order to help out your qualifying relatives, such as your children, grandchildren, or even parents and grandparents.
I do encourage you to seek the advice of your tax professional before deciding to use IRA funds to purchase your home. Everyone’s situation is different.
However, many home sellers with Fairfax homes for sale are awaiting for your offer. Contact me today for a list of available homes!