In the United States, loans cannot typically be used for a home down payment. A down payment represents the buyer’s equity in the property and must come from the borrower’s own funds, such as savings, gifts, or grants. Lenders generally require the down payment to be non-debt-related to avoid increasing the borrower’s existing liabilities. However, exceptions exist through specific programs like down payment assistance, which may provide grants or interest-free loans to cover part of the down payment. These programs do not count as debt but must meet strict eligibility criteria.

The primary reason loans are not allowed for down payments is to prevent excessive debt. A down payment reduces the loan-to-value ratio, lowering the risk for lenders. If a loan were used, it would count as additional debt, raising the borrower’s debt-to-income ratio and potentially disqualifying them for mortgage approval. For example, the Federal Housing Administration (FHA) requires a 3.5% down payment, which must be the borrower’s own money or a gift from a family member. Similarly, Fannie Mae’s HomeReady program mandates a 3% down payment from the borrower’s savings or a qualified grant. According to the U.S. Department of Housing and Urban Development (HUD), 63% of first-time homebuyers used savings for their down payment in 2022, highlighting the reliance on non-loan funds. Down payment assistance programs, such as those offered by state housing agencies, accounted for 5% of total home purchases in 2023, but these are structured as grants or forgivable loans, not traditional debt. Using a loan for a down payment would violate most mortgage underwriting guidelines, as it increases borrowing costs and risks. Thus, while exceptions exist, loans are generally prohibited for down payments to ensure financial stability and compliance with lending standards.