Down Payment Sources and Gift Rules
Savings, gifts, retirement funds, and DPA - what works, what to document, and where borrowers get tripped up.
The Short Version
Down payment funds have to be sourced and seasoned. Sourced means the lender can trace where the money came from; seasoned means it's been sitting in your account long enough (usually 60 days) to be considered yours without further explanation.
This is where a surprising number of loans get held up - not because the borrower doesn't have money, but because a $6,000 deposit two weeks before closing can't be paper-trailed. Handle sourcing early, not on closing week.
Acceptable Sources, Ranked by Friction
Every mainstream loan program accepts these; the difference is how much paperwork each one takes.
- Personal savings and checking (seasoned): easiest. Two months of statements and you're done.
- Documented gift from family: easy with a gift letter and paper trail from donor to closing.
- Sale of an existing home: settlement statement documents the source.
- 401(k) or IRA withdrawal or loan: allowed on most programs; withdrawal has tax implications, a 401(k) loan has a repayment payment that may count toward DTI.
- Sale of assets (car, stocks, crypto): requires proof of ownership, bill of sale or brokerage statement, and deposit trail.
- Down payment assistance (DPA): allowed but adds a second lien or grant document and extra underwriting steps.
Sourcing and Seasoning, in Practice
Two months of bank statements for every account you'll use is the standard document request. Underwriting looks for two things: enough funds to cover down payment, closing costs, and reserves; and no unusual deposits that aren't payroll.
'Unusual' means anything more than roughly half your monthly gross income that isn't payroll. Selling something on Facebook Marketplace for $4,000 the month before closing is an unusual deposit. So is a Venmo transfer from a friend that isn't a gift.
Depositing cash. Cash is the one source lenders cannot verify. If you've been saving cash under the mattress, deposit it more than 60 days before you plan to apply - otherwise it can't be used for down payment, period.
Gift Funds: Rules by Program
Gifts are common and fully acceptable on nearly all owner-occupied loans, but the rules differ by program on who can give and how much.
| Conventional (primary) | Family only; 100% of down payment allowed; gift letter + paper trail |
| FHA | Family, employer, charity, or government DPA; 100% of down allowed |
| VA | Anyone with no expectation of repayment; 100% of any borrower cost |
| Investment property | Gifts generally not allowed toward down payment |
What a Good Gift Letter and Paper Trail Look Like
The gift letter is a one-page document with the donor's name, relationship, gift amount, address of the property, and a statement that no repayment is expected. We provide the template.
The paper trail is what most delays hinge on. The cleanest version: donor writes a check or wires funds directly to escrow at closing, and provides a bank statement showing the funds leaving the donor's account. That's it. Cash gifts, gifts run through Venmo without documentation, or gifts deposited by the borrower and then moved between accounts create hours of extra work.
Retirement Funds: Withdraw vs. Loan
Using retirement funds is completely acceptable, but there are two paths and they have different downstream effects.
- Withdrawal: pull funds and pay income tax plus (if under 59½) a 10% penalty. First-time buyers can take up to $10,000 from an IRA penalty-free but still owe income tax.
- 401(k) loan: borrow against your own balance and repay through payroll. No taxes, but the repayment counts toward DTI, which can hurt qualification.
- Practical answer: if DTI is tight, prefer withdrawal (or a gift). If DTI has room, a 401(k) loan avoids the tax hit.
Down Payment Assistance (DPA)
DPA programs - state, city, and nonprofit - can cover part or all of the down payment for eligible buyers. Most are structured as second liens (repaid later or forgivable after 5–10 years of occupancy) or as outright grants.
The trade-off is complexity: DPA adds underwriting time, income limits, and often first-time-buyer restrictions. We have a dedicated guide to the currently-active programs.
Quick Mortgage also offers a fully forgivable DPA grant - money toward your down payment that is never repaid once the program terms are met. Most other lenders do not offer this grant, and many are not even aware it exists. Eligibility, income limits, and program guidelines apply, and approval is always subject to underwriting - ask us to check whether you qualify before you assume you need to keep saving.