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<<I am weighing the option of taking a withdrawl from my traditional IRA to use as a down payment on a house next Spring. After searching old posts on the Buying or Selling a Home board, I found a post stating that there is a 5-year holding period requirement in order to take an IRA withdrawl and not get hit with the 10% early withdrawl penalty. Is this true, and if so, is it always the case or is there a way around it? >>

As pointed out, you are confusing the rules with respect to a Roth IRA distribution and a traditional IRA distribution when speaking about the 5 tax year holding period. Hopefully you're not straight on that issue.

And, as also pointed out, you MAY be able to use the "first time" homeowner exclusion for up to $10k out of your traditional IRA, if you otherwise meet those qualifications. You can read more about those requirements in my article regarding the first time exclusion in the Tax Center.

Finally, as also pointed out, the first time exclusion is only a PENALTY exclusion. You'll still be liable for any income taxes generated by your traditional IRA distribution.

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