You can withdraw up to $35,000 from your Roth IRA to buy a house, but only under specific conditions and only once in your lifetime

The first-time homebuyer withdrawal lets you take money out of your Roth IRA without the usual 10% penalty if you use it for a down payment, closing costs, or other purchase expenses. The IRS allows up to $35,000 per person over your lifetime — so a married couple could withdraw up to $70,000 combined if both have Roth IRAs. You do not have to pay income tax on the earnings you withdraw, only on any contributions you had not yet withdrawn.

The catch is the definition of "first-time homebuyer." You must not have owned a home in the two years before you withdraw the money. If you owned a house five years ago and sold it, you still count as a first-time buyer. If you owned one two years ago, you do not, even if you no longer own it.

The money must go toward buying, building, or rebuilding a main residence — not a vacation home or investment property. You have 120 days from withdrawal to use the money for the purchase, or you have to put it back into the IRA or face taxes and penalties.

Key Takeaways

  • The first-time homebuyer exception allows you to withdraw up to $35,000 from your Roth IRA without the 10% early withdrawal penalty if you have not owned a home in the past two years.
  • You withdraw from your Roth IRA directly — the money does not go through a lender or mortgage company, and you handle the timing yourself.
  • Earnings on your contributions come out tax-free under this exception, but you pay income tax on any earnings that exceed your total contributions.
  • You have 120 days from the date you withdraw to use the money for the home purchase, or you must return it to avoid taxes and penalties.
  • If you are married, each spouse with a Roth IRA can withdraw up to $35,000, but each person can only use this exception once in their lifetime.

How the withdrawal actually works

You contact your Roth IRA custodian — the bank, brokerage, or investment firm that holds your account — and request a withdrawal. You tell them it is for a first-time homebuyer purchase. The custodian will send you the money, usually within three to five business days. You receive a Form 1099-R at tax time showing the withdrawal amount.

The IRS does not pre-approve the withdrawal or verify that you meet the first-time homebuyer rule. That verification happens at tax time. If you withdraw the money and do not use it for a home purchase within 120 days, or if you do not actually count as a first-time homebuyer, you owe income tax on the earnings portion plus a 10% penalty when you file your return.

You do not need the custodian's permission to use the money however you want — they just process the withdrawal. The responsibility to follow the rules and report it correctly is yours.

What counts as a may have access to home purchase

The purchase must be for your main residence — the house you live in most of the time. It can be a single-family home, a condo, a townhouse, a mobile home, or a cooperative apartment. It cannot be a second home, vacation property, or rental property.

The money can cover the down payment, closing costs, inspection fees, appraisal fees, title insurance, property taxes, homeowners insurance, and mortgage insurance. It can also cover costs to build or rebuild a home if you are constructing rather than buying an existing house.

The 120-day window starts the day you withdraw the money. If you withdraw on January 15, you have until May 15 to close on the house. If the purchase does not close by then, you must return the full amount to your IRA or face taxes and penalties on the earnings.

The tax consequences if something goes wrong

If you withdraw $35,000 and your Roth IRA has $30,000 in contributions and $5,000 in earnings, the withdrawal is treated as $30,000 contributions (tax-free) and $5,000 earnings (tax-free under the first-time homebuyer exception). You owe nothing if you use it for the home.

If you withdraw $35,000 but do not use it for a home purchase within 120 days, you must return it to the IRA. If you do not return it, the $5,000 in earnings becomes taxable income on your tax return, and you owe a 10% penalty on that $5,000 — so $500 in penalty plus whatever your tax rate is on the $5,000.

If you do not actually meet the first-time homebuyer definition — for example, you owned a home 18 months ago — the same penalty applies. The earnings portion is taxed as ordinary income, and you pay the 10% penalty.

Other ways to access your Roth IRA before retirement

You can always withdraw your contributions (the money you put in) from a Roth IRA tax-free and penalty-free, at any age, for any reason. Only the earnings are restricted. If you have been saving in a Roth IRA for years, you may have enough in contributions alone to cover part of your down payment without using the first-time homebuyer exception.

If you have a traditional IRA instead of a Roth IRA, the first-time homebuyer exception works the same way — up to $35,000, one time, within 120 days of purchase. With a traditional IRA, the entire withdrawal is taxable as ordinary income because you got a tax deduction when you contributed. With a Roth, only the earnings portion is taxable.

If you do not meet the first-time homebuyer definition but still need to access your IRA, you can withdraw contributions penalty-free but will owe taxes on earnings. You can also explore a Roth conversion ladder if you have time before the purchase, though that is a more complex strategy.

Deciding whether to use your Roth IRA for a down payment

Withdrawing from a Roth IRA for a house means less money growing tax-free for retirement. If you are in your 20s or 30s, that money has decades to compound. Withdrawing $35,000 now could mean $150,000 or more in lost retirement savings by age 65, depending on investment returns.

On the other hand, if you have other savings available and the Roth IRA is your only source of down payment money, using it may be the right choice. Compare the cost: paying private mortgage insurance (PMI) because you have a smaller down payment, versus losing years of tax-free growth on that $35,000.

If you have a traditional IRA, a 401(k), or other retirement accounts, check whether you can borrow from those instead. A 401(k) loan, for example, lets you repay the money with interest going back into your own account, rather than losing it permanently.

Frequently Asked Questions

Do I have to report the withdrawal to the IRS when I make it?

No. Your IRA custodian reports it on Form 1099-R, which goes to the IRS at tax time. You report it on your tax return. The IRS does not pre-approve or deny the withdrawal — they verify it when you file.

What if I get divorced after I withdraw the money but before I buy the house?

The 120-day clock does not stop. You still have until day 120 to close on the purchase. If you do not use the money for a home by then, you must return it or pay taxes and penalties. A divorce does not extend the deadline or change the rules.

Can I use the first-time homebuyer exception more than once?

No. You can withdraw up to $35,000 once in your lifetime under this exception. If you use it at age 30 to buy a house, you cannot use it again at age 45 to buy a different house, even if you sold the first one.

What if my spouse has a Roth IRA but I do not?

Your spouse can withdraw up to $35,000 from their Roth IRA for the purchase. You cannot withdraw from their account. If you both have Roth IRAs, you can each withdraw up to $35,000, for a combined $70,000.

Does the money have to come directly from my Roth IRA to the seller?

No. The custodian sends the money to you, and you deposit it into your bank account or give it to your title company or attorney at closing. The money does not have to go directly to the seller — you just have to use it for the purchase within 120 days.