Buying a home is expensive and represents one of the largest financial investments a person will perform in your life. Save enough money to make the down payment can take many years. Borrow from your retirement plans or withdraw funds from your Individual Retirement Account (IRA) should be used as a last resort unless you fulfill certain requirements that exempt you from fines and fees. Buy a house with the money from your IRA whether you have a traditional IRA or a Roth IRA.
- Determines which type of IRA you will use. If you have a traditional IRA, pay taxes at retirement, usually, if you are a retiree. If you have a Roth IRA, the money will you bring will be taxed, so that you should not pay taxes when they retire.
- Check the guidelines of the Internal Revenue Service (IRS, for its acronym in English). Buyers of your first home can use $ 10,000 from the traditional IRA funds to purchase a new home, without incurring a fine of 10 percent for withdrawing money before age 59 1/2.
- Determine whether you qualify as a first home buyer. The IRS defines a first home buyer as someone who has not bought a house during the 2 years prior to the date that a house is purchased with IRA funds.
- Make sure your spouse qualifies as a first home buyer, also if you are married and buy the property together. Each can withdraw $ 10,000 from their traditional IRAS.
- Purchase the home within 120 days of your IRA withdrawal.
- Use the money for other acquisition costs including construction or home repairs, closing costs and financing rates.
- Be prepared to pay taxes when you withdraw your IRA. You must pay your federal and state taxes with the money you withdraw from your IRA because it is considered as income.
- Pay the fine if you’re not a first -time home. If you do not qualify as a first home buyer, you can still withdraw money from your IRA to buy a house. In addition to taxes, you will be charged 10 percent on account of penalty on the amount you withdraw.