How To Support An IRA Roth Withdrawal For A Home Purchase
If you are a first time home buyer, you can use funds from your Roth IRA to purchase the house. According to IRA rules, a first time home buyer is anyone who has not been a home owner for the last two years. Therefore, even if you owned a house previously, but do not own one now, you can take the Roth IRA withdrawal for a home purchase. |
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The good thing about this withdrawal for first time home buyers is that you can withdraw up to $10,000 without incurring the 10 percent early withdrawal penalty.
Here are some tips that will help you on how to support your Roth IRA withdrawal for a home purchase:
The first thing that you need to do is open a Roth IRA. You can seek help from a broker for this. You can get an application online, print it out and then fill it and mail it along with a check as your first deposit. Once your Roth IRA is established, your broker will establish an electronic fund transfer system so that you can contribute to the account without having to resort to checks each month.
Once your account is set up, you would have to make monthly contributions to it. However, for the next 5 years, you cannot withdraw the contribution. Once the 5 years lapse, you can withdraw only the contributions that you have been making and not the interest. This withdrawal is viewed as qualified distribution and is not subject to income tax or early withdrawal penalty.
You can withdraw up to $10,000 from your Roth IRA account. However, if you are married and you and your spouse maintain Roth IRAs, you are both eligible to withdraw $10,000 each from your respective accounts.
The money that you withdraw can only be used for building or buying a home, paying for closing costs and other qualified acquisitions costs. Do not use the money to pay for a mortgage loan, home repair or purchasing furnishings. If you do, you will be subjected to taxes and penalties.
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