Using IRA money to fund first purchase

[Account Closed]

I work for a bank and during IRA training today it was briefly brought to our attention that the IRS waives its 10% premature penalty on a Traditional IRA distribution if that distribution is used for a first home purchase for the IRA holder. I have a couple questions regarding this strategy:

a) What is the amount limit that you are allowed to withdraw without penalty? In class they approximated $10,000 but they aren't confident of this amount.

b) Does this strategy also exist for Roth IRAs and if so which plan type would be more beneficial to distribute from?

c) Could this strategy be implemented to fund the purchase of a 1-4 unit residential property if the IRA holder is an owner-occupant? Could this method be used together with an FHA loan?

d) Finally, how long must an owner-occupant live at the property before he is able to relocate and use the former property strictly as an investment?

Thank you so much in advance for your advice!

[Junaid Subzwari]

Hi @Dmitriy Fomichenko Thanks for the great information. Are the rules any different for using a SD IRA? It wasn't called out specifically, so I was curious to know if the rules are different for a traditional IRA vs. a SD IRA. Thanks!