We are building our home, haven't been home owners since '14. Can we w/d 10k from his trad. IRA to help pay for the up front fees for construct loan? Penalties/Taxes?

[ceciliadrogers]

Looking to find out whether or not we can use our traditional IRA money for partial down payment for the building of our home. We have not been homeowners since 2014. This is our first time building a home. We are retired military, but finding a VA lender that will do a construction loan without down payment is almost impossible. So, we are trying to see what is available to us via our traditional IRAs. I have read so much and there seems to be differing advice on this matter. I'm reading that to be considered "first time" home owners, you cannot have owned a home within the last two years. This will be our first home in 4 years, and the first one we've ever built, and the first house we've ever had in Colorado. We've also read that you can use up to 10k towards the house, but sometimes it says purchase of new home and sometimes the word "purchase" isn't included in the verbage. We want to use the money, but we also want to be lawful.

[Opus 17]

For the penalty exception, you can't have owned your main home (where you lived) for at least two years before closing on the new home.  Each IRA owner can withdraw up to $10K to buy or build a "first time" home and be exempt from the 10% penalty for early withdrawals.  You will always owe regular income tax on the withdrawal.  If you both own IRAs, you can withdraw $10K each and be exempt from the penalty, but you can't withdraw $20K from one IRA.