Function

• As of 2010, you are allowed to withdrawal up to $10,000 from your IRA to pay for your first home. You can also use the withdrawal to buy a first home for your spouse, the child or grandchild of you or your spouse, or the parent or grandparent of you or your spouse. The $10,000 limit is a lifetime cap: it is the total amount you are allowed to withdrawal for yourself, a relative or both.
  
  

Principal Residence

• To qualify for a penalty-free IRA withdrawal, you must use the money to pay your principal residence or that of a qualifying relative. That is to say, you cannot use the money to purchase a vacation property or a property you intend to rent. As long as the purchase fulfills this requirement, the type of residence does not matter. You can put the money towards a house, condo, loft, trailer or houseboat.
  
  

First-Time Home Buyer

• The IRS has a unique definition of a first-time homebuyer; in fact, it does not have to be a person who has never owned a home. Rather, the withdrawal's beneficiary cannot have owned a home for two years prior to the date of the new acquisition. If the beneficiary is married, her spouse cannot have owned a home in that period, either. For instance, if your parents sold their principle home on Jan. 1, 2008 and lived in a rented apartment after that, you could take a penalty-free IRA withdrawal to help them purchase a new home on or after Jan. 1, 2010.
  
  

Qualifying Acquisition Costs

• The IRS allows you to use the penalty-free withdrawal to pay for what it calls "qualified acquisition costs." The agency defines qualified acquisition costs as money you spend to build or rebuild a home, or purchase one. You can also use the money to pay for closing costs and fees associated with taking out a mortgage.
  
  

Time Frame

• You have 120 days after you take an IRA withdrawal to put it towards a qualifying acquisition cost. If you do not spend the money within that period, you may owe the IRS a 10 percent early withdrawal penalty.