IRA withdrawal in 2016, closing in 2017. Penalty question.

[Radha Shankar Kallakuri]

Hello everyone, 

I'm buying my primary residence in a few days, and I'm having to withdraw funds from my IRA for the down payment. The closing is mid Jan, but my banker is asking me to get started on the withdrawal process at the earliest, which is this year.

The question i have is, if I start and complete a withdrawal before Dec 31, and close with those funds on Jan 15, what are my tax implications ? I'm taking out less than 10k for my primary residence, so I know I wouldn't have the 10% penalty. But since I will technically have taken out the money in 2016, and did not close on the house in 2016, would I be subject to the 10% penalty ?

I know I can push the closing date out a little bit to have the withdrawal in Jan, but I would need to pay a 0.15% fee to move the closing date. I know 0.15% fee is better than 10% of my withdrawal, but I would like to know what happens in a scenario like mine. 

Is there anything else I should consider in this scenario or is there a better way to handle it other than move the closing date ? Thank you in advance for your responses !