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tgpierre · Joined: 15 Apr 2011 Posts: 1 1.31 Dollars($)

I have no savings, no debt and good credit. I am newly divorced. I want to take money out of my IRA to use as a down payment. I know I will be taxed but it is my only option. Is this acceptable and should I do it before I apply for a mortgage?

jimgilly · Posted: Sun Apr 17, 2011 2:50 am Post subject:

You should first establish adequate (liquid) savings before considering the purchase of a home, otherwise you could end up losing both the money you use to get into the home, along with home itself.

Home values/prices in many areas around the country are still in a decline. It's possible you could buy a home with a small down payment and quickly find you are underwater like millions of others around the country. Run into a problem where your income goes down or you lose your job, you could lose everything including a major blow to your credit rating which will hurt you in more ways than one and take years to recover from.

tfaulhaber1 · Posted: Tue Apr 19, 2011 2:15 pm Post subject:

Yes it's ok. You can do it before or during. Lenders will want a trail of money so, expect to document the withdrawal and deposit.

jimgilly · Posted: Wed Apr 20, 2011 1:56 am Post subject:

tgpierre

In the event you still may be reading this, let me add by saying you may be able to take out a penalty free withdrawal of $10,000 to be used towards expenses related to the purchase of a home. I believe you must not have owned a home in the past two years. Since I am not a CPA or tax expert, you will need to verify this to see if it is still accurate.

I again reiterate, however, that without having adequate liquid savings first, purchasing a home (especially during these times) could prove to be a very risky and unwise decision.

The best advice I can give you is to think very seriously about this before moving ahead. Unless there is a special reason to purchase a home at this time, first build up a cushion for that rainy day, which is always just around the corner.

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