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The definition for first home is very vague and if you have not owned a home in the last two years, you can qualify for penalty free withdrawal. However, if you already own a home and want to withdraw money from your IRA for home purchase, you will not qualify for a penalty free withdrawal.
However, if you are over the age of 59 1/2, using an IRA for home purchase is easy. You can make penalty free withdrawal but you will still have to pay income tax on the amount withdrawn. The other alternative is to make a withdrawal from your IRA for up to 60 days and as long as you replace the money by the 60th day, you will not owe any taxes or penalty on the amount that you withdrew.
First home buyers who are using an IRA for home purchase have to fulfill certain criteria in order to qualify, and they are as follows:
- You should be using the money to purchase your principal residence
- The person for whom it is the principal residence should also be the owner of the IRA or a family member as listed by the IRA.
- The person for whom it is the principal residence should be a first time home buyer. This person can also be someone who has not owned a home in the last 2 years.
- The home purchase must cover qualified acquisition costs.
- You cannot withdraw more than $10,000 as a qualified first time home buyer and this is a lifetime limit.
- The home purchase must be made within a stipulated period of time.
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If you have recently closed your mortgage, you are entitled to a 3-day rescission on purchase of home. This means that you have 3 days to decided whether you want to go ahead with the purchase of the new home or not. During this 3-day period, you have the right to change your mind. 
