According to Roth IRA rules you can use money from your Roth IRA to purchase a home if you are a first time home buyer. But don’t let the Roth IRA rules definition of first time home buyer confuse you if you are trying to qualify for a federal, state, or local first time home buyer mortgage program or IRS housing tax credit.
I’m not sure why, but the Roth IRA rules for tapping into your Roth IRA without penalty or taxation, that I know of, stipulate that you qualify as a first time buyer if you haven’t owned a home in the past two years. This is contrary to most first time home buyer mortgage programs which have a three year requirement where can’t have owned a home. None the less it is good news if you are buying a home as a first time home buyer and want to tap into your Roth IRA.
A Few Rules To Play By
- There Is A Limit: In general the rules allow for an eligible first time home buyer who has a Roth IRA to pull up to $10,000 out of their Roth IRA to purchase a home. This limit is a lifetime limit.
- Get Qualified First: One thing you do not want to do is pull your money out too soon. If you plan to use your Roth IRA money to buy a home, make sure that you get yourself qualified for your mortgage first. The limit for accessing your Roth IRA for buying a home is 120 days. If you pull your money out too early you could be subject to having to pay penalties and fees for early withdrawal, so be careful.
The process of getting qualified for a home should even include finding the home. In today’s home buying market – 2010 – it is taking a fair amount of time to not only get through the bank qualifications but extra delays can be expected if you are trying to buy a home that is a short sale home.
This just about covers some of the very basics about using your Roth IRA to buy a home. Of course, to determine your exact qualifications you should consult with tax preparer or financial advisor.