Say you are getting a house and get preapproved for a certain amount. This amount plus your downpayment is just shy of the required amount. If say, your father offers to take a loan for 10-30,000$, and give it to you as help to cover the remaining amount. But says that you will need to pay it off for him.

Is this legal? Is there a way to make this legal? Thank you for all information.

  • 3
    There are many questions on this site about borrowing for a DP. IIRC, if someone is giving you the DP, then the bank wants a signed document swearing that it's a gift, since otherwise it's a loan which counts toward LTV.
    – RonJohn
    Jul 28, 2019 at 17:03
  • 1
    Yes, Ron is right, it just take a member a bit of time to identify appropriate duplicate question . Jul 28, 2019 at 17:26

1 Answer 1


It's certainly legal. Since you will be paying this loan back, however, the bank will need to count the payments against you in determining how much you can afford to pay each month (your debt to income ratio). That will likely decrease the size of the mortgage you can qualify for.

It is generally not a great idea. Taking out a loan that reaches or even exceeds what you can get preapproved for means that you will be spending a tremendous fraction of your income on debt payments. The general advice around here would be to look for a home that is well below the maximum value you can get approved for since that ensures that you'll have enough money to pay it back and to handle other financial priorities. Borrowing from a relative further complicates things. You'll be putting yourself in a precarious financial position where your father is on the hook if something goes wrong. That can stress the best of familial relations.

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    This is a good answer but there are implications that the lender will consider beyond just DTI. They will also be keenly sensitive to the loan to value ratio on the property, and making a "cash" downpayment funded with a third party loan throws that ratio off (it makes it look like you had a bigger down payment than you really did). Besides this potentially disqualifying you for the loan, you may have a cost impact. Lenders generally price interest rate based on credit risk so rate won't likely change, but they will have PMI requirements based on LTV, so you may be required to carry more PMI.
    – dwizum
    Jul 29, 2019 at 13:05

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