This is one of the highest-impact education topics for first-time buyers trying to bridge a down payment gap—but it needs to be done carefully.
IRA early distribution: first-time homebuyer exception
The IRS lists an exception to the 10% additional tax for qualified first-time homebuyers up to $10,000 (rules and definitions apply).
401(k) loans: the basic repayment rule
IRS guidance explains that plan loans generally must be repaid within five years with at least quarterly payments, with an exception to the five-year requirement if the loan is used to purchase a primary residence (subject to plan rules).
The risk checklist (don’t ignore this)
- Borrowing from retirement can create long-term opportunity cost
- Plan rules vary (a loan is only possible if the plan permits it)
- A mortgage strategy built on retirement funds must also cover closing costs and reserves
FAQ
Can I take $10,000 from my IRA for a first home without the penalty?
IRS describes an exception up to $10,000 for qualified first-time homebuyers (eligibility definitions apply).
Are 401(k) loans always allowed?
No—IRS states plans may, but aren’t required to, offer loans.