At 61 -1st time home buyer. Like to use a 20 yr old IRA as $down. Will normal tax bracket % apply on the IRA (as income) after the 1st 10K (1st time buyers' allowance)?

You misunderstand.   The first time home buyer exemptions is only for the 10% early distribution penalty, not the normal tax.   The penalty only applies if you are  under age 59 1/2 so at 61 there is no penalty reguardless of what you do with the money.

The first 10,000 is only for a penalty if you were under 59 1/2 and have a 10% Early Withdrawal Penalty.   You are older so no penalty.  Either way the whole distribution is taxable (over any basis you might have) and may push you into a higher tax bracket.  So be careful.   

Thank you! 

Thank you