Homebuyers and First-Time Homebuyers Finding the Down-Payment While the tax credit can be a big help for qualified homebuyers, many first-time homebuyers are still faced with the challenge of coming up with the down payment.   1) FHA allows gifting of down payments and closing costs by a family member, close friend, borrower’s employer or labor union. Some who have money in an IRA or 401(k) with a previous employer may be able to access part of that money without losing a large chunk of it to taxes and early withdrawal penalties.

2) Tap your IRA without tax penalty

You can withdraw up to $10,000 (once in a lifetime) from your IRA to buy a first-time home for yourself or for a family member.  While not be subject to the IRS 10% early withdrawal penalty, normal taxes will still apply. What if you don’t have an IRA? If you do not have an IRA, you can roll over into a “Rollover IRA" your retirement funds from previous employers where you had a qualified pension plan such as a 401(k)   403(b) tax-sheltered annuity plan Other qualified plan Cash Value Insurance Policies Many people have permanent Insurance policies that have built up a cash value over time and do not realize that they can get policy loans for little or no interest. So long as you do not surrender the policy it is not typically a taxible event.