How to Borrow From a Roth IRA for Your First House

by Susan Reynolds

The Roth IRA is often used to save money for retirement purposes. If you withdraw money from it before the age of 59 1/2 you can incur fees up to 10 percent. There is, however, a way to take out some of your IRA money to buy a new home without having to pay the steep penalties. The requirements are stringent, but buying your first home is one of the very few ways you can tap into your IRA early.

1. Meet the requirements for the first-time home buyer distribution. You must have held the Roth IRA for at least five years. The home (or houseboat) must be your main residence - not a vacation home, or investment or rental property. You must be buying the home for yourself or a close family member, such as a child, grandchild, or spouse, who has not owned a home in the last two years. And you cannot take out more than $10,000.

2. Contact the company that manages your account and ask them for a check for the amount you need. Withdraw up to $10,000 from your Roth IRA. If you have a spouse with an IRA, she may also withdraw up to $10,000 from her account. You may use the combined $20,000 toward a single home purchase.

3. Use the money to pay qualified acquisition costs, such as home building costs, closing costs, settlements, or financing for the home. You must spend the money within 120 days of withdrawing it from your Roth IRA in order to avoid penalties.

4. Report the Roth IRA withdrawal on your taxes using the Form 1099-R issued to you by the account manager. You will not face any penalties as long as you follow all the rules for buying your first home.


  • If you decide not to buy the house, you may deposit your Roth IRA money back into the account without penalty, but it must be within 120 days.

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