First-Time Home Buyer

AAA

DEFINITION of 'First-Time Home Buyer'

An individual who is purchasing a principal residence for the first time. First-time home buyers are more commonly recognized according to several criteria with regards to an individual retirement account (IRA). If these criteria are met the owner can be granted special privileges, such as exemption from the early-distribution penalty.

INVESTOPEDIA EXPLAINS 'First-Time Home Buyer'

The purchase does not need to be a traditional home in order for the individual to qualify as a first-time homebuyer, but it must be the principal residence. For example, it could be a houseboat that will be lived in. The maximum amount that may be distributed from the IRA on a penalty-free basis for this purpose is $10,000. This is a lifetime limit. For married couples, the limit applies separately to each spouse. This means that the combined limit for a married couple is $20,000.

The penalty applies to IRA distributions that occur before the IRA owner reaches a specific age, such as 59.5 years old.

RELATED TERMS
  1. Excise Tax

    1. An indirect tax charged on the sale of a particular good. ...
  2. Qualified Distribution

    Distributions made from a Roth IRA that are tax and penalty free. ...
  3. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
  4. Qualified Acquisition Cost

    These are items, in the context of IRA withdrawls, that constitute ...
  5. Foreclosure Prevention Act of 2 ...

    A housing act that is designed to help families keep homes that ...
  6. Roth IRA Conversion

    A reportable movement of assets from a Traditional, SEP or SIMPLE ...
RELATED FAQS
  1. What are the advantages of a Roth IRA?

    A Roth IRA has many advantages for lower-income investors. Though they are not tax deductible, contributions to your Roth ... Read Full Answer >>
  2. What is the Roth IRA 5 year rule?

    The Roth IRA five-year rule usually refers to the penalties incurred for withdrawing from a Roth IRA before five tax years ... Read Full Answer >>
  3. I sold my house. Can I exclude the gain from my income?

    Generally, you are required to include the gain from the sale of your home in your taxable income. However, if the gain ... Read Full Answer >>
Related Articles
  1. Home & Auto

    Top 8 House-Hunting Mistakes

    These common mistakes occur when you allow your emotions to take over.
  2. Home & Auto

    Measuring The Benefits Of Home Ownership

    Price appreciation is the biggest factor, but it's not the only thing to consider.
  3. Home & Auto

    Selling Your House? Avoid These Mistakes

    Don't put the sale of your home at risk by committing one of these dirty deeds.
  4. Home & Auto

    To Rent Or Buy? The Financial Issues

    Thinking of buying a home? We look at the initial and ongoing costs, as well as the so-called benefits.
  5. Budgeting

    Starting Early With Financial Planning

    You can achieve your financial goals if you start early enough. Here are some tips.
  6. Budgeting

    7 Smart Steps Every New Homeowner Should Take

    Don't let the excitement of owning your own home lead you to make bad financial decisions.
  7. Home & Auto

    10 Worst First-Time Homebuyer Mistakes

    These errors could wind up costing you more than the coveted key to your first home.
  8. Home & Auto

    Real Estate Face-Off: Zillow Vs. Trulia

    Both websites help you find homes for sale, but they organize the information differently. Here's how they compare.
  9. Personal Finance

    What's a Commercial Bank?

    A commercial bank is a type of financial institution that accepts deposits, offers checking account services, makes business, personal and mortgage loans; and offers basic financial products ...
  10. Home & Auto

    Getting A Mortgage In Your 50s

    The financial considerations are different when you take out a mortgage in your 50s. Here's what you need to review as you calculate the pros and cons.

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center