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The Home Stretch

If you're looking for cash to buy a house, your retirement account could open the door.

This story appears in the January 2005 issue of Entrepreneur. Subscribe »

One thing that didn't change with the Fed's shift on interest rates this summer is the variety of mortgage options for first-time home buyers. The days when you needed a 20 percent down payment and borrowed the rest from the bank down the street are long gone. Mortgage writers offer a number of nontraditional arrangements these days, customizable by type of loan, number of loans and down payment variations. The catch: Most require at least some down payment or the ability to pay closing costs, or both. If all your money is tied up in a business or in other investments, you might be left on the outside looking in.

Enter old reliable, the Individual Retirement Account (IRA). First-time home buyers are allowed to borrow $10,000 apiece-$20,000 per couple-from their IRAs to pay for a house down payment or closing costs. Similarly, if you just need a bridge loan until other money gets freed up, you're allowed to withdraw cash from an IRA for up to 60 days penalty-free. As long as the money is back in your account by the 60th day, the IRS pretends nothing happened. If you need quick money for the closing date but can replace it within two months, this is an alternative.

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