Using an IRA for a First Home Purchase

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...

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Your First Home Purchase

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...

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