Mortgage  Question?
Can You Give Spouse 401k Gift for Down Payment on Home?

Can you give your spouse money from your 401(k) as a gift for a down payment on a home?

Harry Jensen
, Trusted Mortgage Expert with 45+ Years of Experience
Edited by Michael Jensen

The short answer to your question is that yes, you can give your spouse funds from your 401(k) account as a gift for the down payment on a home. In this scenario, you are not a co-borrower on the mortgage and you do not own the property unless you are added to the title after the purchase closes. If you are a borrower on the mortgage and on the property title, then giving your spouse a down payment gift is effectively giving a gift to yourself.

There are several points that we want to highlight about giving a spouse a down payment gift from your 401(k) account or any type of account for that matter. First, lenders apply strict guidelines that cover down payment gifts. Lenders are required to verify the source of funds for your down payment, especially if all or part of the funds comes from a gift. In short, the lender must confirm that the money provided is truly a gift and not a loan.

Use ourDOWN PAYMENT CALCULATORto determine the funds required to buy a home

The gift provider is typically required to provide a gift letter that outlines the terms of the gift including where the money came from and stating that the recipient does not need to repay the gift. In some cases lenders request bank statements -- or other financial documents such as a 401(k) account statement in this specific case -- to confirm the source of funds for the gift.

It may also be helpful if the funds are seasoned in the gift recipient’s bank account for at least one-to-two months before he or she applies for the mortgage although this is not always possible given the relatively short time frame when you buy a home. If the funds are in the applicant’s bank account for more than two months the lender may require less documentation for the down payment gift.

There are a couple of additional points to keep in mind if you want to use money from your 401(k) account for the gift. First, early withdrawals from a 401(k) account are subject to a 10% penalty as well as personal income taxes.

To avoid the penalty and taxes you should consider taking out a loan from your 401(k) instead of making a withdrawal. In this scenario you borrow money from your account and use the proceeds from the loan to provide the down payment gift to your spouse. You repay the loan over time, usually through automatic deductions from your paycheck.

Review How to Use Your Retirement Account to Buy a Home

You can usually borrow $50,000 or 50% of your vested 401(k) account balance, whatever is less, but we recommend that you contact your plan administrator to confirm your borrowing capacity. Taking out a loan from your 401(k) also involves risks -- you are usually required to repay the loan if you lose your job or leave your company -- but this approach may be more tax-efficient than a withdrawal.

The other point to keep in mind is that different rules apply to different types of retirement accounts. For example, you can withdraw $10,000 from an individual retirement account (IRA) penalty-free to buy your first home. You can also use the funds to provide a down payment gift to your spouse as long as he or she qualifies as a first-time home buyer.

The $10,000 first-time home buyer exception only applies to IRAs and not 401(k) accounts. This is why it may make more sense to use funds from an IRA rather than a 401(k) account for a down payment gift.

Any time you take money out of a retirement account, regardless of the type of account or type of withdrawal, there are tax potential tax consequences to consider. We always recommend that you consult an accountant or tax specialist to help you determine the right approach.

Additionally, guidelines for down payment gifts vary by lender. We recommend that you consult multiple lenders in the table below to understand their requirements and to find the best mortgage terms. Shopping lenders is the best way to save money on your mortgage.

Current Mortgage Rates in Ashburn, Virginia as of April 12, 2024
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Rate data provided by Displayed by ICB, a division of Mortgage Research Center, NMLS #1907, Equal Housing Opportunity. Payments do not include taxes or insurance premiums. Actual payments will be greater with taxes and insurance included. Read through our lender table disclaimer for more information on rates and product details.


"Topic No. 557 Additional Tax on Early Distributions from Traditional and Roth IRAs."  IRS.  Internal Revenue Service, February 13 2020.  Web.

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About the author
Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR.  Harry is a licensed mortgage professional (NMLS #236752). More about Harry

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