No, You Cannot Use a Personal Loan as a Down Payment on a House
If you are like many, you may get several notices in the mail every week about the unsecured personal loans you could qualify for; some of them even look like a check ready to deposit into your bank account. When you see a simulacrum of a check for tens of thousands of dollars made payable to you, it is tempting to think about what you might do with the money. This might even be your big chance at home ownership, if only you could use the loan money as a down payment on a house or condominium. You cannot use personal loans as down payments on home mortgages, but you can use them to improve your credit score, which will eventually make it easier to qualify for a mortgage. To strategize about your path to home ownership and about the best possible uses for a debt consolidation loan, contact a Boca Raton debt lawyer.
If the Mortgage Lenders Get Paid, Why Do They Care If You Begged, Borrowed, or Stole the Down Payment?
The approval process for home mortgage loans is rigorous indeed. Loan officers scrutinize your income and expenditures over the months leading up to the loan application and continuing up to the actual purchase of the home. They want to make sure that you will be able to continue making payments on the loan for decades to come, as mortgage loans have very long repayment terms. They also want to make sure that the money you are using for the down payment came into your possession through legitimate means, such as you saving up for it gradually from your paychecks. If you get a sudden windfall, you will need to show the paper trail to account for it. For example, if you inherited the money from a deceased relative, you should show the documents from the probate court. Real estate transactions are a common money laundering tactic, but just because you show that you borrowed the money instead of getting it by selling oxycodone on the dark web, this does not mean that you have earned the lender’s trust. The lender doubts that broke chump like you can keep up with payments on both the mortgage and the personal loan.
There Are Better Ways to Get the Funds for a Down Payment
If you don’t have a lot of money sitting in your savings account, you have other options for a down payment. First, look for the loan that requires the smallest down payment; most first-time homebuyers cannot afford a 20 percent down payment. Some mortgage loans require a down payment of as little as three percent. Money that you received as a gift is fair game for a down payment, as long as you can show the source and reason for the gift. If several relatives gave you cash gifts at your wedding, for example, keep the money in your savings account for six months and then apply for a loan. The canceled checks from people who share a family name with you or with each other, the memo lines that say “wedding gift” and the dates that match up with your marriage certificate will be enough to convince the mortgage lenders.
There Are Better Uses for a Personal Loan
A personal loan can help you qualify for a mortgage, but it can’t be a down payment on a house. Instead, use the loan to pay off other debts so that you save money on interest, improve your credit score, and have more money to save on a down payment.
Work With a Debt Lawyer About Home Ownership Aspirations
A South Florida debt lawyer can help you pay off your debts and raise your credit score. Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.