First-Time Home Buyer

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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.

BREAKING DOWN '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.

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    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 >>
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    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 >>
  4. Can I take my 401(k) to buy a house?

    Once you reach 59.5, you can use the funds in your 401(k) retirement savings account to buy a house or any other expense ... Read Full Answer >>
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