Using Your Roth IRA For Down Payments
Did you know you can use your Roth IRA to make a down payment on a house?
Know which type of IRA you have before you withdraw the money out to use for a down payment. Do you have a Roth IRA or a Traditional IRA?
Roth IRA’S do not charge taxes for first time home buyers that have had the IRA for 5 years or more. You will also not have to worry about paying a penalty on your withdrawal. Traditional IRA’S require you to pay taxes even after 5 years, but you still will not pay a penalty.
For either a Traditional IRA or a Roth IRA there is a limit of $10,000 that you can take out to use as a down payment on a home. If you need more than $10,000 you will have to pay a penalty, along with taxes.
If you take money out of your Traditional IRA or your Roth IRA before you have had it for 5 years, you will pay a 10% penalty if you are younger than 59 and if you are not a first time home buyer.
When deciding to use your IRA to make a down payment on a home, write a check out from your IRA checks for the amount of the down payment. You can use cash, but you should use a check instead. This will give you a record of your down payment.