Funds must be used within 120 days for "qualified acquisition costs," including a down payment, closing costs, or building/rebuilding a home .
You (and your spouse) must not have owned a primary residence in the two years prior to the purchase .
This $10,000 exception is a lifetime cap per individual . Married couples can each withdraw $10,000 for a total of $20,000 .
You can also use this exception to help a child, grandchild, or parent with their first home purchase . Tax and Penalty Breakdown
Only the 10% early withdrawal penalty is waived under the first-time homebuyer exception .
Because traditional IRAs use pre-tax dollars, the full withdrawal amount is taxed as ordinary income at your current tax rate .
If you are under age 59½, the IRS allows you to withdraw up to penalty-free from a traditional IRA for a "first-time" home purchase .
If you are older than 59½, you can withdraw any amount for any reason without penalty, though you still owe income tax . Understanding the First-Time Homebuyer Exemption