Can You Use a Personal Loan for a Down Payment? Here’s What Works Instead

If you want to buy a home now but haven’t saved enough cash, a personal loan can look like a shortcut. But the major mortgage programs won’t accept money from an unsecured personal loan for a down payment. And your lender will check where your down payment came from.

That’s a hard answer when the numbers are this big. The median first-time homebuyers put down 9%, according to the National Association of Realtors. Meanwhile, new homes sold for a median $400,400 in September 2026, according to the Census Bureau. Nine percent would mean saving up about $36,000.

Can I use a personal loan for a down payment?

No. Fannie Mae, Freddie Mac, and FHA don’t accept money from an unsecured personal loan for a down payment. When you submit your mortgage application, the lender will look at your bank statements, income, and other documentation to verify the source of your down payment and cash reserves. A new personal loan also shows up on your credit report as a new account and a hard inquiry, so a lender will see it either way.

Run the numbers >> Use Kikoff’s affordability calculator to see what you can afford with the down payment you actually have.

Why mortgage programs won’t allow it

Borrowing money with a personal loan runs into several issues:

• A new loan raises your DTI. When reviewing your application, lenders consider your debt-to-income ratio, a measure of how much of your income goes toward debt each month. A personal loan's monthly payments could push your DTI above the lender's acceptable threshold. Each program and lender sets its own DTI limit. Fannie Mae allows up to 50% through its automated underwriting.
• You’d be paying two loans at once. Juggling two forms of debt at once increases your financial risk.
• You have to disclose it. Your application asks where your down payment came from, and the lender asks you to explain large deposits. Misstating the source on a mortgage application is fraud, even if you pay off the loan before closing.
• Money must be "seasoned." Lenders usually ask for your two most recent monthly bank statements to show you've had the money in your account. A new loan would stand out.

Read more >> 11 Questions to Ask a Mortgage Lender Before Applying

Alternatives to using a loan for a down payment

Low down payment mortgage programs

Some mortgage programs have low down payment requirements. For example, if you're eligible for a U.S. Department of Veterans Affairs (VA) or U.S. Department of Agriculture (USDA) home loan, you may not need any down payment at all. Conventional loans can go as low as 3% down if at least one borrower is a first-time buyer.

FHA loans are built for lower credit scores. With a score of 580 or higher, you can put down 3.5%. With a score from 500 to 579, you’ll need 10% down. On a $400,000 home, that’s $14,000 versus $40,000.

Down payment assistance programs

Some states and financial institutions have homebuyer assistance programs that can help you with the down payment amount. For example, Florida Assist offers up to $10,000 on FHA, VA, USDA, and conventional loans as a 0% deferred second mortgage. You don't make payments on it, but you repay it when you sell, refinance, or pay off your first mortgage.

Your state housing authority runs most of these programs. A HUD-approved housing counselor can tell you which ones you qualify for.

Gifted funds

Loved ones can help you achieve your dream of buying a home. The donor signs a letter saying the money doesn’t need to be repaid, and your lender documents the transfer. FHA also allows a loan from a family member.

Delay buying

Waiting a few months can lower what you pay. More savings means a smaller loan, and a higher credit score can land you a lower rate.

If you rent, your rent payments don’t show up on your credit report on their own. Kikoff’s rent reporting sends them to Equifax and TransUnion, and you can add up to two years of past rent for a one-time $50 fee.

Read more >> First-Time Homebuyer Programs: What’s Available in All 50 States‍

How does my credit score affect my down payment options?

Your credit score affects what mortgage programs you can qualify for, so the better your credit, the more options you'll have.

Fannie Mae dropped its 620 minimum score for loans run through its automated system in November 2025. Your score still sets your price. Fannie Mae charges lenders an upfront fee based on your score and down payment.

With 20% down, the fee for scores of 639 and below is 2.75% of the loan amount, compared with 0.375% at 780 and up, according to Fannie Mae’s September 2026 pricing matrix. You’d pay the difference through a higher rate or more cash at closing. Freddie Mac and individual lenders set their own pricing.

Before you apply, check your reports for free each week at AnnualCreditReport.com. If something is wrong, you can dispute it with the bureau for free. If you'd rather not draft the letters yourself, Kikoff's AI Credit Disputes helps you prepare them, and Premium and Ultimate plans can mail them for you.

Read more >> What Credit Score Do You Need to Buy a House?

Bottom line

A personal loan won’t work for a down payment, but you may need less than you think: 3.5% with FHA, 3% on some conventional loans, or nothing down with VA or USDA.

Your credit plays a big role in the homebuying programs you qualify for and what you’ll pay. And your score sets the rate on every dollar of your 30-year loan.

Kikoff’s Credit Account reports your on-time payments to Equifax, Experian, and TransUnion, with no credit check to sign up. Plans start at $5 a month.