Can I Use My IRA to Help Buy My First Home in Woodland Hills?

Jonathan Lopez, Woodland Hills Realtor | Jim Sandoval Group | CA DRE #02282844 · Updated September 2026

First-time buyers in Woodland Hills spend a lot of energy on down payment myths (the 20% assumption, the idea that a gift from parents is the only real shortcut) and often miss a source of funds they already have: their own retirement account. The IRS built a specific, penalty-free carve-out into the tax code for exactly this situation, and it's narrower and more particular than most people assume.

The $10,000 Lifetime Exception

Under IRS Publication 590-B, a first-time homebuyer can withdraw up to $10,000 from an IRA without paying the usual 10% early withdrawal penalty that normally applies before age 59 and a half. The catch is timing: the money has to be used to pay qualified acquisition costs, meaning a down payment, closing costs, or reasonable settlement costs, before the close of the 120th day after you receive the distribution. Miss that window and the exception doesn't apply. This is a lifetime limit, not an annual one, and it applies across every IRA you hold combined. You cannot pull $10,000 from a Roth and another $10,000 from a Traditional IRA and call both penalty-free, the cap is $10,000 total, once, ever.

Married Couples Can Double It

Because the exception is per person, a married couple can each draw on their own IRA, for a combined $20,000 penalty-free, as long as each spouse independently qualifies as a first-time homebuyer and each withdrawal comes from that spouse's own account.

Who Actually Counts as "First Time"

The IRS defines a first-time homebuyer as someone who has had no present ownership interest in a main home during the two-year period ending on the date the new home is acquired. That is a narrower, more forgiving window than some assistance programs use. CalHFA's MyHome Assistance Program, for comparison, requires three full years without ownership interest in a principal residence. It's possible to qualify for the IRS's IRA exception while still falling short of CalHFA's stricter three-year rule, so the two need to be checked separately rather than assumed to match.

Traditional IRA vs. Roth IRA, They Don't Work the Same Way

A withdrawal from a Traditional IRA under this exception skips the 10% penalty, but the withdrawn amount is still taxed as ordinary income in the year you take it, since Traditional IRA contributions were typically made pre-tax. A Roth IRA is more favorable in two ways. Your own contributions to a Roth can always be withdrawn tax-free and penalty-free at any time, for any reason, since you already paid tax on that money going in. If you're withdrawing Roth earnings (growth beyond what you contributed) under the first-time homebuyer exception, those earnings skip the 10% penalty regardless of account age, but only come out fully tax-free too if the Roth account has been open at least 5 years. A Roth opened more recently still gets the earnings out penalty-free, just not tax-free.

Sizing the Real Impact

It helps to see this against Woodland Hills' actual numbers rather than in the abstract. The current median sale price is $1,348,500 (Movoto, updated September 14, 2026). A standard 3.5% FHA minimum down payment on that median works out to roughly $47,200. A single buyer's $10,000 IRA withdrawal covers about 21% of that down payment; a married couple's combined $20,000 covers roughly 42%. That's meaningful, but it's rarely the whole down payment on a Woodland Hills purchase on its own. It stacks well with other tools already covered on this site: a parental gift under the IRS's separate $19,000 annual gift tax exclusion, or CalHFA's MyHome deferred junior loan, both of which can close the remaining gap.

The Tradeoff Nobody Should Skip

Pulling $10,000 or $20,000 out of a retirement account, even penalty-free, removes that money (and its future tax-advantaged growth) from your retirement timeline permanently, there's no repayment provision like there is with a 401(k) loan. For a buyer in their 20s or early 30s, $20,000 left invested for another 30 years is a materially larger number by retirement than the same $20,000 spent today. This is exactly the kind of tradeoff a CPA or financial advisor should walk through before anyone withdraws, not after.

Buying a first home in Woodland Hills usually means stacking several smaller tools rather than finding one silver bullet. A penalty-free IRA withdrawal is a real, IRS-sanctioned piece of that stack, worth knowing about even if it isn't the whole answer. Once the financing side is mapped out, I can help make sure the home itself is worth putting that money toward.

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