Can You Use Assets or Home Equity for a Down Payment?

Yes. You can fund a mortgage down payment by selling investments, borrowing against equity in a home you own, or using net proceeds from selling that home. Lenders decide whether each source is acceptable, so the best choice depends on taxes, new monthly debt, and documentation.

Can You Sell Assets to Fund Your Mortgage Down Payment?

Yes. You can sell stocks, bonds, mutual funds, or other investments to raise cash. Selling does not create a new loan payment, but it can trigger capital gains tax. According to the IRS, gains on assets held longer than one year are generally taxed at long-term rates, while shorter holdings are taxed as short-term gains. Fees and taxes reduce your cash, so keep emergency savings.

Lenders typically verify where down payment money came from. Keep brokerage statements, sale confirmations, and bank statements showing the proceeds arriving in your account.

Can You Use Home Equity to Fund a Mortgage Down Payment?

Yes. A home equity loan or home equity line of credit (HELOC) lets you borrow against a home you own. Home equity is the home’s current market value minus your mortgage balance: a $400,000 home with a $250,000 mortgage has $150,000 in equity.

Home equity loan: A lump sum, generally with a fixed rate and scheduled monthly payments.
HELOC: A revolving credit limit with a draw period followed by a repayment period. The rate may be variable, and payments depend on your balance, rate, and repayment terms.

Both are secured by your home, so missed payments could put it at risk of foreclosure.

Will Mortgage Lenders Accept Borrowed Home Equity as a Down Payment?

Often, with conditions. Fannie Mae’s Selling Guide treats borrowed funds secured by an asset as an acceptable down payment source, and HELOC funds must be documented as secured by real property and disbursed to you. Personal unsecured loans are not acceptable. Other loan programs and lenders may have their own rules, so confirm with your lender before drawing funds.

How Do DTI and CLTV Affect Home Equity Borrowing?

Debt-to-income (DTI) ratio compares your monthly debt payments with gross monthly income. A new equity payment can reduce the mortgage amount you qualify for. Combined loan-to-value (CLTV) ratio compares all loans secured by the property with its value:

CLTV = (mortgage balance + new loan or HELOC limit) ÷ property value × 100

Example: ($250,000 + $50,000) ÷ $400,000 = 75% CLTV. Lenders set their own CLTV limits, so you usually cannot borrow 100% of your equity.

Using Proceeds From a House Sale for a Down Payment

Net proceeds from selling your current home can fund your next down payment:

Net proceeds = sale price − mortgage payoff − commissions and closing costs − applicable taxes

Example: a $400,000 sale, a $250,000 payoff, and $24,000 in selling costs leave about $126,000 before taxes. If you buy before your home sells, lenders evaluate payments on both properties and may ask for documentation of expected proceeds.

Home Equity Loan vs. HELOC vs. Selling Assets

Feature	Selling Assets	Home Equity Loan	HELOC
Funding source	Investments	Home equity	Home equity
New monthly payment	None	Fixed installments	Varies with balance, rate, and terms
Interest rate	Not applicable	Usually fixed	May be variable
Access to funds	After sale settles	Lump sum	Revolving credit
Main risk	Taxes, market timing	Foreclosure	Foreclosure, rate changes