 TITLE: Can You Use a Personal Loan as a Down Payment? CONTENT: Conforming conventional loans, as well as FHA loans, do not allow homebuyers to use personal loans as down payments. Even if you find a lender and type of loan that doesn't explicitly forbid it, using a personal loan as a down payment may still not be an option. There are a couple reasons for this.\nWhen applying for a mortgage, the lender will take a deep dive into your financial life and pay close attention to how your debt relates to your income. They'll look at your recent pay stubs and pull your credit report to calculate what percentage of your gross monthly income goes toward debt payments—something known as your debt-to-income ratio (DTI). This involves looking at all recurring monthly debt payments, from credit cards to student loans to auto loans. Personal loans are on the table as well.\nMortgage lenders generally require a DTI that's less than 43% (or 36% for some lenders). Taking out a new personal loan to use as a down payment will nudge your DTI upwards, which will likely be a red flag to lenders. In some cases, it might increase your DTI enough to put you over the eligibility threshold and disqualify you as a mortgage borrower. It could also suggest that you may not be in the best financial position to buy a home. Either case makes it unlikely that a lender will accept a personal loan as a down payment.\nInstead, lenders will want to see that you've got enough money available in your bank accounts to cover your down payment. All large deposits—including funds that come in from a personal loan—will need to be verified and substantiated. END