Is money from a spouse considered a gift?

[Anonymous]

My credit scores are much better than that of my wife and I have very little debt. She works part time and has little income, so I plan on taking out a mortgage in my name only. If we cash out her 401k currently around 17k to use as down payment is this still considered a gift and require proper documentation. I do not live in a communal property state. Would it be easier to put this in savings for 3+ months until we are ready to apply.

[DallasLoanGuy]

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@Anonymous wrote:
My credit scores are much better than that of my wife and I have very little debt. She works part time and has little income, so I plan on taking out a mortgage in my name only. If we cash out her 401k currently around 17k to use as down payment is this still considered a gift and require proper documentation. most likely.  I do not live in a communal property state. Would it be easier to put this in savings for 3+ months until we are ready to apply.  best option

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[Anonymous]

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@Anonymous wrote:
My credit scores are much better than that of my wife and I have very little debt. She works part time and has little income, so I plan on taking out a mortgage in my name only. If we cash out her 401k currently around 17k to use as down payment is this still considered a gift and require proper documentation. I do not live in a communal property state. Would it be easier to put this in savings for 3+ months until we are ready to apply.

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Short version.. YES

as long as the spouse is not on the loan or the bank statments where the gift is coming out of.

[VanRickets]

Yes, it counts as a gift.  I'm starting a new job, so we had to apply for a mortgage in my husband's name only.  I gifted him $53,000 into our joint savings account.  They still need to see the rest of our downpayment and closing cost money, so I will have to gift him more later on.

[Anonymous]

Thanks everyone for the reply. So I completely forgot that the account is no longer in a 401k but was rolled over to an IRA when my wife changed jobs, don't know if that makes any difference. 10k can be withdrawn without a penalty if used towards the purchase of a house. I assumed that my wife's name had to be on the mortgage, but when I asked someone with my bank they said as long as her name is on the deed it can work. They said it was a good question, but I sensed some hesitation so I'm not sure. What are your thoughts? My wife plans on speaking with her financial advisor to get some clarification and see what our best option is. I will update when I know more.

[alyssamarie]

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@Anonymous wrote:
Thanks everyone for the reply. So I completely forgot that the account is no longer in a 401k but was rolled over to an IRA when my wife changed jobs, don't know if that makes any difference. 10k can be withdrawn without a penalty if used towards the purchase of a house. I assumed that my wife's name had to be on the mortgage, but when I asked someone with my bank they said as long as her name is on the deed it can work. They said it was a good question, but I sensed some hesitation so I'm not sure. What are your thoughts? My wife plans on speaking with her financial advisor to get some clarification and see what our best option is. I will update when I know more.

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My parents are buying a house right now this way. Only my mom is applying for the mortgage but they are using $10k from my step dad's IRA for down payment and closing costs and haven't had any issues so far. The paperwork for the withdrawal said that it can be used for you or a spouse. 

My guess would be that her advisor will most likely advise against taking out the money, they don't get paid on money that they don't manage so I would just keep that in mind. Although there may be reasons that could make this legitimately not a smart financial choice, so it's always a good idea to get an opinion!

[VanRickets]

You can take out $10,000 from an IRA if it is for a first time home purchase.  Unfortunately, that's not the case for us.  I liquidated my 401k when I became unemployed, because you can withdraw it all without penalty if you are 55 or over when you lose your job.  My other 401k was rolled over into an IRA and that cannot be touched without accruing the 10% penalty.