A first home purchase is a big financial commitment. Not only are you taking on a mortgage, but you often need to deplete cash reserves to come up with the down payment. But what if you don’t have enough socked away for a down payment? or what if you prefer not to use all your cash reserves, leaving some cushion in your savings account? Normally the Internal Revenue Service levies a 10% penalty on distributions from a Traditional Individual Retirement Account (IRA). They make an exception on distributions up to $10,000 for a first home purchase.
How does the IRS define a first home purchase?
To qualify, it’s important to know how the IRS defines a first time homebuyer. According to IRS Publication 590-B, a first time homebuyer is defined in the following way:
Generally, you are a first time homebuyer if you had no present interest in a main home during the 2-year period ending on the date of acquisition of the home which the distribution is being used to buy, build, or...
So you’re getting ready for your first home purchase. This is the first in a two-part series. The second is entitled, How Much Mortgage Can I Afford? To qualify for a mortgage you need a good credit score.
Down payment and qualifying for a mortgage
In buying your first place you’ve got two main considerations: Coming up with a down payment is number one. Number two is being able to qualify for a mortgage loan. In this post, I hope to help you get ready to obtain your first mortgage. Specifically, you’ll learn how to get a good credit score in order to qualify for a mortgage.
Good credit is accurate credit
Your first project is to make sure that your credit report is accurate. I say project, because it may very well be just that – a project. There are three major credit bureaus: Experian, Transunion, and Equifax. Each time you make a reportable event with one of your credit grantors – say Macy’s – that event shows up on your credit report. So...