Posted on: 08th Jan, 2007 08:49 pm
my wife and i have bought a house recently. just a week after closing, we came to know that we can use our ira towards a first time home purchase and each person can take out $10,000 towards qualified acquisition costs. we have got a 80-10-10 mortgage, 10% down payment. should we be able to use $10,000 from our iras without a penalty if we can put money in repaying our second mortgage based on 10% of the home.
Hi Mike and Nila,
Welcome to the forums.
That's a good choice but I am afraid you can't go for it. The law does not allow one to take out IRA distribution to repay a first or a second mortgage.
The penalty that you are talking about can be avoided only if you are a first time buyer (not having owned you home for the past 2 years) and have decided to use the IRA money to pay qualified acquisition costs.
Thanks,
Sara
Welcome to the forums.
That's a good choice but I am afraid you can't go for it. The law does not allow one to take out IRA distribution to repay a first or a second mortgage.
The penalty that you are talking about can be avoided only if you are a first time buyer (not having owned you home for the past 2 years) and have decided to use the IRA money to pay qualified acquisition costs.
Thanks,
Sara
Mike and Nila, you can use IRA funds to pay acquisition cost. But the house should be your principal residence. The funds should be used within 120 days of taking out cash from IRA account.
I own a RV in an RV Park. I have an IRA. I last bought a house in 1999. I no longer own that house. It went to my Ex-wife in a 2003 divorce.
Can I withdraw money from my IRA to buy a house without a Tax Penalty?
Can I withdraw money from my IRA to buy a house without a Tax Penalty?
Hi andrew!
Welcome to forums!
Yes, you may be able to take out money from your IRA to buy a house under certain conditions. But there is a tax penalty for early withdrawal from an IRA. If you withdraw the money out before you turn 59 1/2 years old, then you will be charged 10% of the withdrawal amount you take. However, there are several exceptions to the early withdrawal tax. One of them is that when you are buying a home and you have never used IRA money for this purpose before. The exemption is mainly available for first-time home buyers and under it, you may use up to $10,000 of the money you have in your IRA. You can only do this once in your lifetime.
Sussane
Welcome to forums!
Yes, you may be able to take out money from your IRA to buy a house under certain conditions. But there is a tax penalty for early withdrawal from an IRA. If you withdraw the money out before you turn 59 1/2 years old, then you will be charged 10% of the withdrawal amount you take. However, there are several exceptions to the early withdrawal tax. One of them is that when you are buying a home and you have never used IRA money for this purpose before. The exemption is mainly available for first-time home buyers and under it, you may use up to $10,000 of the money you have in your IRA. You can only do this once in your lifetime.
Sussane
Hi Stephen!
Welcome to forums!
You will have to face a penalty if you withdraw funds from the IRA before you turn 59 1/2 years old. Moreover, you'll have to pay taxes as well. If you are not 59 and 1/2 years old, I would suggest you not to withdraw funds from the IRA.
Sussane
Welcome to forums!
You will have to face a penalty if you withdraw funds from the IRA before you turn 59 1/2 years old. Moreover, you'll have to pay taxes as well. If you are not 59 and 1/2 years old, I would suggest you not to withdraw funds from the IRA.
Sussane
You are lookign at refinacing, this may nto appy.
Now the law allows individuals to receive distributions from their traditional IRAs to pay up to $10,000 of first-time homebuyer expenses without incurring the 10% early withdrawal penalty that usually applies to withdrawals from a traditional IRA before age 59 1/2. But, even though the penalty is waived, you will still be required to pay taxes (as applicable) on the traditional IRA withdrawal itself.
Now the law allows individuals to receive distributions from their traditional IRAs to pay up to $10,000 of first-time homebuyer expenses without incurring the 10% early withdrawal penalty that usually applies to withdrawals from a traditional IRA before age 59 1/2. But, even though the penalty is waived, you will still be required to pay taxes (as applicable) on the traditional IRA withdrawal itself.
If my husband takes money from his 401K from a company he no longer works for to use towards our 1st home purchase, is the penalty waived?? Do the funds HAVE to be used within 120 days?? He wants to withdraw the $$ but we have not found a home yet.
Laura H
Welcome to the forum.
Amounts withdrawn from your 401(k) plan and used towards the purchase of your home will be subject to income tax and a 10% early-distribution penalty. This applies even though the distribution will be used towards the purchase of your first home, because the first-time homebuyer exception does not apply to distributions from qualified plans such as 401(k) plans.
If the money is with a former emploer and if you with draw for payign for your house, you still end up payign tax.
To avoid these taxes, you need to follow simple step. First you need to roll the fund over to a IRA account and then with draw. But you need to rememeber that, these funds needs to be used for purchasing the house by 120th day after you receive the funds.
Good luck and feel free to ask.
Realgeni
-Good credit is easy to achieve, as long as you use it responsibly.
Welcome to the forum.
Amounts withdrawn from your 401(k) plan and used towards the purchase of your home will be subject to income tax and a 10% early-distribution penalty. This applies even though the distribution will be used towards the purchase of your first home, because the first-time homebuyer exception does not apply to distributions from qualified plans such as 401(k) plans.
If the money is with a former emploer and if you with draw for payign for your house, you still end up payign tax.
To avoid these taxes, you need to follow simple step. First you need to roll the fund over to a IRA account and then with draw. But you need to rememeber that, these funds needs to be used for purchasing the house by 120th day after you receive the funds.
Good luck and feel free to ask.
Realgeni
-Good credit is easy to achieve, as long as you use it responsibly.
I have came across an article about 401k withdrawal rules["www.bankonyourself.com/401k-withdrawal-rules"]. I want you to read it hope will help you a lot
[Link deactivated as per forum rules. Thanks.]
[Link deactivated as per forum rules. Thanks.]
Hi rolandocarey,
Thanks for sharing that website. :) I went through the website and found it to be quite informative. I agree with you that the information would help a lot of people.
Thanks
Thanks for sharing that website. :) I went through the website and found it to be quite informative. I agree with you that the information would help a lot of people.
Thanks
rolandocarey9682
Welcoem to the forum and thnaks for sharing.
Welcoem to the forum and thnaks for sharing.
Does a mobile home purchase, not attached to land, qualify for the exemption under 1st time home buyer for early withdrawal of IRA?
My husband and I are buying a house. Since he has had credit problems, the mortgage will be in only my name, but the title will be in both of our names. Can we use money from his IRA to put towards closing costs/ down payment even though he is not on the mortgage loan? The loan is a FHA loan, and allows a gift to be used for the downpayment.
Hi sssmith,
A first time home buyer is allowed to withdraw a maximum of $10,000 from his IRA. If he is married, his spouse can also take out $10,000 from her individual IRA and thus as a married couple they can both withdraw a total of $20,000. A first time buyer is one who has not owned a primary residence for the past 2 years. The rules do not specifically mention that the mobile home has to be on a permanent foundation in order to qualify as a first home. You should be able to withdraw $10,000 from your IRA to purchase the mobile home.
Hi Tiffany,
Your husband will be able to withdraw a maximum of $10,000 from his IRA. It does not matter whether or not he is on the loan. If he is a first time home buyer, he can withdraw money up to the specified limit without paying any penalty. It is not necessary for him to co-sign on the loan with you in order to be eligible to take out money from IRA.
Thanks,
Jerry
A first time home buyer is allowed to withdraw a maximum of $10,000 from his IRA. If he is married, his spouse can also take out $10,000 from her individual IRA and thus as a married couple they can both withdraw a total of $20,000. A first time buyer is one who has not owned a primary residence for the past 2 years. The rules do not specifically mention that the mobile home has to be on a permanent foundation in order to qualify as a first home. You should be able to withdraw $10,000 from your IRA to purchase the mobile home.
Hi Tiffany,
Your husband will be able to withdraw a maximum of $10,000 from his IRA. It does not matter whether or not he is on the loan. If he is a first time home buyer, he can withdraw money up to the specified limit without paying any penalty. It is not necessary for him to co-sign on the loan with you in order to be eligible to take out money from IRA.
Thanks,
Jerry