How to Use an IRA For House Down Payment

You will need to be familiar with the different types of IRAs before using any of it for investment. Knowing details about your IRA(s) will be beneficial for using it for investments in the future or possibly now.

Things You'll Need

• IRA
• Know the difference between Roth and Traditional
• Have IRA checks

Instructions

How to Use an IRA for a House Down payment

1. Know which IRA you have (Roth or Traditional) before pulling money out to use it for a downpayment.

2. Roth IRA doesn't charge taxes for first time home buyers that have had the IRA for five years or more. There's no penalty either. Traditional IRA requires you to pay taxes even after five years, but there's no penalty.

3. There is a limit of $10,000 for either type of IRA that you can take out for a down payment on a home. If you need more you will pay a penalty along with the taxes.

4. There is a ten percent penalty fee if you take out money from Roth or Traditional IRA before five years of having it, if younger than 59 years old, and if not a first time home buyer.

5. Once you decide to use your IRA as a down payment for your new home then make a check out from the IRA checks for the amount you are using as a down payment. You can also get cash from the bank you have the IRA at, but you should use a check instead.

Tips & Warnings

• Ten percent of the money may be worth pulling out from the IRA sooner than five years if you find a home you really want for a good deal.

• Be aware that if you have a traditional IRA you will pay penalties and taxes for various reasons. If you have a Roth IRA you will not pay penalty or tax after five years.