Lenders typically will not allow you to use a personal loan for a home down payment, but you should be aware of your other options.

HAVING A DECENT DOWN payment on a house can reduce how much you need to borrow and the interest you’ll pay on the mortgage. It can also potentially qualify you for a lower interest rate.

If you don’t have enough cash on hand for a big down payment, you might think about using a personal loan. But in general, mortgage lenders don’t allow the use of personal loan funds for a down payment. Also, having a personal loan on your credit report can affect your ability to qualify for the amount you need for the mortgage.

Here’s why personal loans usually aren’t an option if you need a down payment and which alternatives are available.

Why a Personal Loan for a Down Payment on a House May Not Work

A mortgage is a lengthy financial commitment, both for you and the lender. The more money you borrow, the riskier it can be for the lender if you ultimately stop making payments, even if it’s years into your mortgage.

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