Are borrowed funds acceptable as a down payment source for a mortgage?
Answers | 2
Secured borrowed funds are allowed. An example of this would be an equity line against another property you may own. This draw and payment must be documented and will count against your debt to income, as Caroline pointed out. But other sources won't count against you.
You can borrow against most 401(k) plans. Check with your plan administrator, but most plans allow for a loan at 5% with a 5 year term. Pay it back on time and no IRS penalties. Even better, this debt does NOT count in your debt to income ratio for a conventional or FHA loan.
Non-secured borrowed funds (such as from a friend) are not acceptable for most investors. In the cases where it may be allowed, you will be hit with the payment in your debt to income and it must be a properly recorded Note. Additional restrictions on the rate, term and allowable balloon will vary by investor.