Accumulating funds for that crucial down payment for your home is a real obstacle for many first time home buyers in Iowa. Many first time home owners will have a hard time paying the traditional 20% down payment, especially if this will be their first home. Iowa Finance Authority has a comprehensive list of funding grants and programs for Iowans. However, first time home owners may not be aware that they can also tap into their Individual Retirement Account to help finance a mortgage down payment. Financing a mortgage with the help of your IRA is a lucrative option that is commonly overlooked.
The IRA is a tax free or a tax referred savings account. First time home buyers in Iowa and other states will be penalized 10% if they decide to take funds from their IRA before they’re 59 ½ . However, the fee will not be implemented if you are using the funds to help pay for a mortgage. This is part of the tax benefits mandated by the 1997 Taxpayer Relief Act.
IRA for Down Payment on Mortgage Benefits
You will be able to withdraw with no penalty, even if you are younger than 59 ½
You can remove up to $10,000 from your IRA to make a down payment for your first home in Iowa – or any other part of the United States
An IRA can be opened at local banks in Iowa. Iowa State Bank Investment Services in Des Moines can help you in your plan to secure a mortgage with your IRA. Pinnacle Bank in Marshalltown and First State Bank of Colfax in Colfax, Iowa, can also aid you in opening and managing your IRA.
If looking for IRA mortgage services online, then ING Direct has a comprehensive list of mortgage solutions. They have attractive rates for savings accounts, home loans, and mortgage financing. You can also create an Individual Retirement Account through them as well. Opening fees at Iowa banks and ING Direct will be determined by marital status, income levels, and other variables. However, associated fees are usually considerably less than other investment accounts.
As a first time home buyer in Iowa, using IRA funds as a mortgage down payment option can help give you an edge. However, there are a few restrictions after removing funds from the IRA - you will have 120 days to use the funds to purchase a home. The home must also be the buyer’s main place of residence. Removing the $10,000 from your IRA to help pay your Iowa home can only be done once per account over the course of your life time.
Since your IRA is essentially your retirement fund, it is important to choose if you want to utilize IRA funds for the mortgage or to save it off for retirement. The Iowa Finance Authority has a comprehensive list of funding programs to help secure your first home. Exhaust all other outlets of financial assistance before tinkering with your IRA. There are also many options on this page to help secure and pay for your mortgage down payment.
Kaiser Castro - Kaiser Castro has been a professional freelance writer for Trails.com, Livestrong.com, and eHow. By utilizing his degree in Business ...
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