After years of fairly easy lending standards for buyers, homeowners did not have to worry about coming up with large downpayments for their first homes. But since the lending standards for homebuyers has tightened significantly in the past year, new homeowners need to learn the tricks to coming up with a larger downpayment to qualify for a mortgage.

One of these tricks is to use money from your IRA to fund the downpayment. Each spouse is able to withdraw 10,000 dollars for a downpayment on their first home from their IRA tax free. This money can be used for the downpayment or to refurbish the home within the first 120 days of homeownership.

For younger families that were not expecting to have to come up with a 10 or 20 percent downpayment, this could be the difference in getting into a new home or continuing to rent. And if you are an agent, it could help a deal from falling through when the buyers are trying to qualify for their mortgage.

Withdrawing cash from an IRA before you turn 591/2 typically carries hefty penalties, but the IRS makes an exception for first-time home buyers.
You can take up to $10,000 out of your IRA penalty-free as long as you put the money toward building, buying or refurbishing your first home within 120 days of receiving the money.
If your spouse also qualifies as a first-time buyer, you can get up to $20,000 to invest in your dream home.
A first-time home buyer is anyone who hasn’t held an ownership interest in a main home for the last two years, according to IRS Publication 590. via Ohio.com

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