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Normally, if you withdraw money from a traditional or Roth IRA before you reach age 59-1/2, you would pay a 10% early distribution penalty on the distribution, in addition to any regular income tax due. There is, however, an exception for distributions used to pay qualified higher education expenses.

You may withdraw your contributions to a Roth IRA penalty-free at any time for any reason, but you'll be penalized for withdrawing any investment earnings before age 59 ½, unless it's for a qualifying reason.

In 2001, before he is age 59 1/2, Paul withdraws $10,000 from the Roth IRA. Paul will have no tax to pay on this withdrawal because he paid income taxes on the full $20,000 he converted in 1998; however, he WILL have to pay a 10% penalty (or $1,000) unless one of the IRA early withdrawal exceptions apply.

The Roth IRA owner is at least age 59½ when the distribution occurs. The distributed assets are used toward the purchase, or to build or rebuild a first home for the Roth IRA owner or a qualified family member.

Five years must have elapsed since the tax year of your first Roth contribution before the earnings can be withdrawn tax-free. Contributions to the account can be withdrawn at any time tax- and penalty-free.

In order to purchase a home of $400,000, one could access a 95% loan of $380,000, meaning you'll need to provide a cash deposit of $20,000. However, you can add the cost of LMI of to the loan amount (up to $8,000), which brings the total loan up to $388,000 or 97%.