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I took out some cash from my Roth IRA which falls under the same tax code. I think the limit for a one time withdrawl for 1st time home buyer is $10K. I'm not sure that you can use it for anything other than the Down Payment but, you might get an answer here otherwise. I would suggest checking with a CPA should be a quick and free phone call or ask your agent you're using to purchase. They should know or be able to find out for you.
Most people tap their IRA's for this purpose, but you can do a hardship 401(k) withdrawal for a house purchase, but you'll get whacked with income tax AND a 10% penaly AND you can't make contributions for six months. Not a good way to go about it. You would be better off taking a loan, up to $50,000, from your employer's plan and paying it back up to 5 years in length. You'll have to check on the plan with your employer.
IRA money does NOT have to be used for the down payment, but there are strict requirements that the withdrawal has to occur within a certain number of days of closing. Maximum lifetime withdrawal is $10k per taxpayer (married couple can extract $20k if they each have an IRA). And of course you pay tax on the amount withdrawn at ordinary income tax rates.
Here are the key points for a traditional IRA:
First-home exemption
If you're married, and you and your spouse are both first-time buyers, you each can pull from retirement accounts, giving you $20,000 in residential cash.
Even better is the IRS definition of first-time homebuyer. Technically, you don't have to be purchasing your very first abode. You qualify under the tax rules as long as you, or your spouse, didn't own a principal residence at any time during the previous two years. In fact, you can even share your IRA wealth. The IRS says the first-time homebuyer using your IRA funds for a down payment can be you, your spouse, one of your children, a grandchild or a parent.
Be careful not to take out your money too soon. You must use the IRA funds within 120 days of withdrawal to pay qualified acquisition costs. This includes the costs of buying, building or rebuilding a home, along with any usual settlement, financing or closing costs.
@Watchmann wrote:Most people tap their IRA's for this purpose, but you can do a hardship 401(k) withdrawal for a house purchase, but you'll get whacked with income tax AND a 10% penaly AND you can't make contributions for six months. Not a good way to go about it. You would be better off taking a loan, up to $50,000, from your employer's plan and paying it back up to 5 years in length. You'll have to check on the plan with your employer.
IRA money does NOT have to be used for the down payment, but there are strict requirements that the withdrawal has to occur within a certain number of days of closing. Maximum lifetime withdrawal is $10k per taxpayer (married couple can extract $20k if they each have an IRA). And of course you pay tax on the amount withdrawn at ordinary income tax rates.
Here are the key points for a traditional IRA:
First-home exemption
If you're married, and you and your spouse are both first-time buyers, you each can pull from retirement accounts, giving you $20,000 in residential cash.Even better is the IRS definition of first-time homebuyer. Technically, you don't have to be purchasing your very first abode. You qualify under the tax rules as long as you, or your spouse, didn't own a principal residence at any time during the previous two years. In fact, you can even share your IRA wealth. The IRS says the first-time homebuyer using your IRA funds for a down payment can be you, your spouse, one of your children, a grandchild or a parent.
Be careful not to take out your money too soon. You must use the IRA funds within 120 days of withdrawal to pay qualified acquisition costs. This includes the costs of buying, building or rebuilding a home, along with any usual settlement, financing or closing costs.
WATCHMAN, I LOVE YOU! DH took out money from his 401K for our first home but he's not on the loan so i didn't know if he'd get the penalty waived. Since your post says it can even apply to kids, it surely should apply to me! YAY
OP - sorry for the hijack. I couldnt help myself.
When you submit your loan request - you'll be asked to provide a copy of the accepted offer, or other proof that you're actually buying a house. After that, you can use that money towards your down payment and whatever else you might need. I wondered the same thing when I went through this in August. I pulled out X amount of dollars from my 401k - used 1/3 of it to pay down payment and closing costs. The remainder I have been using to buy things that I don't currently have (couch, tables - my previous roommate owned all that) and to make sure I have a few months of living expenses in savings just in case. Hope that helps.
@lmgood wrote:When you submit your loan request - you'll be asked to provide a copy of the accepted offer, or other proof that you're actually buying a house. After that, you can use that money towards your down payment and whatever else you might need. I wondered the same thing when I went through this in August. I pulled out X amount of dollars from my 401k - used 1/3 of it to pay down payment and closing costs. The remainder I have been using to buy things that I don't currently have (couch, tables - my previous roommate owned all that) and to make sure I have a few months of living expenses in savings just in case. Hope that helps.
I'm doing the same thing. Part of the funds are going towards my down payment and our part of the closing costs. Also going to split the cost of the radon mitigation system with the seller. In the spring we're probably going to need to add some vents to the garage attic so I wanted funds for that. Since there is a penalty and you're only allowed to do this once, I wanted to make sure I'd have funds there in case something pops up (like this radon thing).
You're very welcome
My closing costs changed so many times in the last couple of weeks before I finally closed, that I didn't know how much I was going to need or have left over. But when the rates dropped like a hot potato, I was able to lock in at a pretty good rate, which lowered my down payment, and I was suprised w/ extra money back from HUD for closing costs. So I went from needing to take over $12k to closing, to only need $7,700 - yay!
Hi, rules might vary according to your plan. I am in the process of making a withdrawal right now. With my plan, I can withdraw up to half the value of my savings (with a rolling limit of 50K per year) for any purpose, with a maximum 5 year repayment schedule. For a home purchase only, everything else is the same, but it can be paid back over 10 years. My administrator requested a copy of sales agreement to prove it was for a primary residence, but that's it.
GL!