Another Source For A Down Payment

Another Source For A Down Payment

Most taxpayers know that they will pay a 10% penalty if they withdraw funds from their IRA before they turn 59.5 years old. There is an exception for first­time home buyers that allows a penalty-free withdrawal of up to $10,000 per person if they haven’t owned a home in the previous two years.

This would allow a married couple who each have an IRA to withdraw a lifetime maximum of $10,000 each, penalty-free for a home purchase.

In many cases, the money would be used for a down payment or closing costs. However, some buyers might consider this source to increase their down payment so they could qualify for a loan without mortgage insurance.

If the taxpayer qualifies for the penalty-­free withdrawal, there may still be taxes due. Contributions to traditional IRAs are made with before­-tax dollars and the tax is paid when the funds are withdrawn. Since Roth IRAs are made with after­tax dollars, there is no tax due when the funds are withdrawn.

Another interesting fact about this provision is that the taxpayer making the withdrawal can help a qualified relative which includes children, grandchildren, parents and grandparents.

Homebuyers who are considering using IRA funds for a home purchase should get expert advice from their tax professional concerning their individual situation.


Tory Sartwelle Headshot
Author:
Phone: 713-828-0179
Dated: March 21st 2016
Views: 289
About Tory: Specializing in Houston's Premier Inner Loop and near town neighborhoods the Museum District, Midtow...

Property Search








RSS Feed

View our latest blog posts in your RSS reader. Click here to access. RSS

Search Blog

Recent Blogs

From I Do To Sold - From "I Do" to "Sold"Newlyweds are
How To Work 2018 Top Color Trends Into Your Home - The “nothing but neutrals”
7 Things To Know Before You Renovate - While certainly an exciting
How Long Should You Pay Your Landlords Mortgage Instead Of Your Own - Rent vs. Own CalculatorIn the

Saved Properties

This is a list of your favorite properties. We will email you if a property is reduced or leaves the market.

Click 'Save' to add a property to this list.

Register / Login

New & returning visitors please enter your information to login.

By clicking 'register' you are agreeing to our terms of use & giving us expressed written consent to contact you.

Questions? Comments? Complaints?

This message will go directly to the head of our team.

Location & Address

eXp Realty Houston
9600 Great Hills Trail Suite 150W
Austin, TX
325-939-0845