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First home. Even if you are under age 59½, you do not have to pay the 10% additional tax on up to $10,000 of distributions you receive to buy, build, or rebuild a first home. To qualify for treatment as a first-time homebuyer distribution, the distribution must meet all the following requirements.
It must be used to pay qualified acquisition costs (defined later) before the close of the 120th day after the day you received it.
It must be used to pay qualified acquisition costs for the main home of a first-time homebuyer (defined later) who is any of the following.
Yourself.
Your spouse.
Your or your spouse's child.
Your or your spouse's grandchild.
Your or your spouse's parent or other ancestor.
When added to all your prior qualified first-time homebuyer distributions, if any, total qualifying distributions cannot be more than $10,000.
You may not have to pay the 10% penalty but you will still need to pay regular income taxes on the distribution. IMO if you cannot buy a home without taking money out of your IRA you should concentrate on saving a down payment. FHA loans only require 3% down. That's hardly anything.
Not worried about pulling from the IRA, there will be other funds to go with it also. We are in a position where we will likely be relocating at the end of the year and just am not interested in moving stuff into a rental for a few months only to turn around and move again. Also, not sure if I want to do an FHA 3% which is why I was looking to add some extra funds to the savings we do have available and go with a bigger down payment and not have any restrictions that come with FHA. Still learning though, so not sure.
im not sure about the logic of pulling the retirement money for a house.
our financial lives are like fighting a war. we have all these different fronts going on at the same time.
we need money for now, money for a house, money for emergencies and money for retirement.
pulling from one front to support another front is winning the battle and eventually losing the war..having your retirement money in your house is not a retirement investment... you will still need a place to live and your lifetime of housing costs will easily be more then any residual value on the home.
if you cant do this without taking your retirement money then you cant afford to do this.
I appreciate all the concerns, but I've heard both sides of that argument and I've made my decision. We have been paying tons of money per month for the last 18 months to eliminate debt and are near the end of paying off all credit cards and having 2 autos in good condition paid off. Once that is finished, the IRA will get a lot more attention. I've improved my credit score from mid 600's to around 830 by focusing on debt elimination instead of a balanced financial approach. Some people agree with this method, some don't, but I'm fine with it as it is working great. Our income to debt ratio is very good and about to be great once we finish paying off a few things that are almost finished. Yes I know I could just wait til its paid off and save up for a down payment then. But that will require us to rent again, pay for movers and storage costs, and all of those costs. That is just money thrown away if we would be turning around to buy a house 3-6 months later, no to mention the hassle of moving twice in a very short time frame. So again, my mind is made up. Its not like I'm planning to wipe it out for a down payment.
I appreciate all the concerns, but I've heard both sides of that argument and I've made my decision. We have been paying tons of money per month for the last 18 months to eliminate debt and are near the end of paying off all credit cards and having 2 autos in good condition paid off. Once that is finished, the IRA will get a lot more attention. I've improved my credit score from mid 600's to around 830 by focusing on debt elimination instead of a balanced financial approach. Some people agree with this method, some don't, but I'm fine with it as it is working great. Our income to debt ratio is very good and about to be great once we finish paying off a few things that are almost finished. Yes I know I could just wait til its paid off and save up for a down payment then. But that will require us to rent again, pay for movers and storage costs, and all of those costs. That is just money thrown away if we would be turning around to buy a house 3-6 months later, no to mention the hassle of moving twice in a very short time frame. So again, my mind is made up. Its not like I'm planning to wipe it out for a down payment.
Good for you txboomerang. Try to stay away from manufactured demand, keep the debt down, & put as much equity in your home as you can. In the long run, the only way this Country/Economy is going to get back on its feet is for its citizens to have equity in their homes. If you’re a financially responsible person, having a home with equity is a nice ‘fallback’ as life’s obstacles come your way.
Not to minimize JOBS, but we had lots of jobs from 2000-2008, & look where it got us. Home equity is the foundation IMO, everything else will fall into place.
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