Special situations

Can I use a personal loan to fund a down payment on a house?

Short answer

Generally no for conforming mortgages. Conventional, FHA, VA, and USDA loan underwriting explicitly prohibits using borrowed funds for the down payment. The personal loan deposit will appear in your bank statements during mortgage underwriting and lead to either decline or DTI re-evaluation.

Context

Mortgage underwriters trace large deposits in your bank account for 60-90 days before close. A personal loan disbursement is obvious. The underwriter will either decline the application or add the loan payment to your DTI, often pushing you above the threshold.

Workarounds: take the personal loan more than 90 days before mortgage application so it 'seasons' as savings, use a documented gift from family instead (which is permitted), or explore low-down-payment loan programs (FHA 3.5%, conventional 3%) that reduce the down payment need.

Editorial

Reviewed by: Compliance Review
Last reviewed: May 22, 2026

Glossary: DTI

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