First-Time Home Buyer


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.

  1. Qualified Distribution

    Distributions made from a Roth IRA that are tax and penalty free. ...
  2. Qualified Acquisition Cost

    These are items, in the context of IRA withdrawls, that constitute ...
  3. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
  4. Traditional IRA

    An individual retirement account (IRA) that allows individuals ...
  5. Non-Qualified Distribution

    1) A distribution from a Roth IRA that occurs before the Roth ...
  6. Roth IRA Conversion

    A reportable movement of assets from a Traditional, SEP or SIMPLE ...
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