First time homebuyer IRA withdrawl

[Kofi Quaye]

Hello,

I have money in my 401K. I am leaving my job and I am considering using 10K of my retirement towards a home purchase using the first time homebuyer provision. Can I move my money to a traditional IRA or a Roth IRA to take advantage of this provision?

Would someone be able to help me estimate the tax implications of this decision?

Would the fact that I am leaving my job, that I have been at for three years, help me more than it would hurt me in the eyes of the mortgage company?

[George Blower]

@Kofi Quaye

Yes thanks to the Taxpayer Relief Act of 1997 the qualified first-time home-buyer exception, up to $10,00 applies to both traditional and Roth IRAs. See the chart on the following IRS page. 

https://www.irs.gov/retirement-plans/plan-particip...

Also see

IRC Sec. 72(t)(2)(F)

Under IRC Sec. 72(t)(8)(D)(i)(I), a first-time homebuyer is defined as an individual (and, if married, the individual’s spouse) that had no present ownership interest in a principal residence during the two-year period ending on the date of acquisition of the principal residence. The date of acquisition means the date on which an individual enters into a binding contract to acquire the principal residence or on which construction or reconstruction of such a principal residence commences.

Yes you could transfer the former employer 401k to a Traditional IRA and then process the distribution from there.