Eureka!!!

I have figured out a way that I can realistically buy a house in the next 1-2 years. The main problem when going to buy a house is that pesky down payment. Realistically, I am looking for a good starter home that will run for about 150,000ish. I have money in a 401k, but if you take out money early (before 60) you get killed in taxes and penalties. What is the way around this you ask?

Step 1: Move the money
Tax the 401k money (15%) and open a Roth IRA. You can fund a Roth IRA up to 5,000 per year. I would fund 5,000 this year (before April) and put in an additional 5,000 next year. There are no penalties for withdrawing funds from a Roth IRA as long as you don't withdraw earnings. Closing cost's factor in to be around 2,500-3,000 additionally.

Step 2. Re-funding the retirement fund.
Thanks to the first time home buyer tax credit, you can receive a 8,000 credit when you file your taxes. That 8,000 would go directly back into the Roth IRA. SWEET.

So there you have it, I get the money needed for down payment, and my retirement fund doesn't take a huge hit.

I am going do the major remodeling work on the house and Kristin will be the decorator.