I need a conventional loan using my IRA funds

[Ross A.]

I plan to use some of my IRA funds as a down payment to buy and hold income properties. What type of lenders are out there? Will this be a commercial loan? I hope not :(

TIA

[Brian Eastman]

@Ross A.

When your IRA borrows, special considerations apply.

The debt instrument must be non-recourse, meaning no personal guarantee from you. As a disqualified person to your IRA, you may not pledge your assets as security for the IRA's debt. A handful of lenders offer such loans nationally, including:

First Western Federal Savings, SD

North American Savings Bank, MO

Solera National Bank, CO

Titan Bank, TX

When an IRA uses debt-financing, taxable income referred to as Unrelated Debt-Financed Income (UDFI) is generated. The tax impact is generally negligible, and will represent a dent in the increase in return that leverage produces. You will want to discuss the topic with your IRA provider and/or licensed tax advisor to ensure you understand the impact and administrative process involved for your IRA.