Can You Use Stocks as Collateral for a Conventional Loan?

The Quick Read: Not directly. On a standard Fannie Mae or Freddie Mac loan, the home is the collateral, and your brokerage account is not pledged to the lender. Your stocks can still help you buy. You can sell them for the down payment and closing costs, leave them in place as verified reserves, borrow against them and use the proceeds, or (in limited cases) convert them into qualifying income. Which path fits depends on how much of the value is verifiable, whether the shares are vested, and whether any margin debt sits against them.

What “Collateral” Means on a Conventional Loan

The property secures a conventional mortgage. If the loan goes unpaid, the lender’s remedy is against the house, not your portfolio. That is the default structure across the wholesale programs Lendmire works with, and it is how agency-backed loans are built.

So the real question is a different one: how does a lender treat stock when it reviews your file? There are four routes. Each has different mechanics and different risk.

A separate product exists in the market, the “pledged asset” mortgage, where securities serve as extra collateral in place of some or all of the cash down payment. It is lender-specific. No Fannie Mae or Freddie Mac guide text creates it as a standard feature, and it is not part of the conventional envelope described here. If a lender offers one, treat it as its own product with its own terms.

Key Terms Defined

Reserves: Verified funds left in your accounts after closing, which show the lender you can keep paying if income dips.

Margin account: A brokerage account that lets you borrow against your holdings; the borrowed balance reduces what your stock is worth for lending purposes.

Vested: Fully yours, with no remaining condition that could take the shares or options back.

Securities-secured loan: A loan from a brokerage or bank that uses your stocks as security, separate from your mortgage.

Asset depletion: A method that turns a pool of assets into a monthly income figure for qualifying.

Path A: Sell the Stock for Down Payment and Closing Costs

This is the most common route and the simplest. Per the Fannie Mae Selling Guide, vested stocks, bonds and mutual funds are acceptable sources of funds for the down payment, closing costs and reserves, as long as the value can be verified.

The lender counts the value net of any margin balance, using your most recent monthly or quarterly statement. Then comes a cushion test. If the verified value is at least 20% more than the cash you need for the down payment and closing costs, you do not have to document the actual sale proceeds. If the cushion is thinner, the lender must document that you received the funds from a sale.

Here is the catch: the statement drives the value. A market drop between the statement and closing can shrink the cushion below that 20% line, and then the paper trail gets heavier. Borrowers holding volatile positions should keep that in mind when choosing which shares to sell.

Selling also has a leverage upside. Across the programs Lendmire places, purchase leverage on a principal residence runs to 95% on a standard purchase and 97% when at least one borrower is a first-time buyer on a fixed rate. Mortgage insurance applies above 80% loan-to-value. A larger down payment funded from stock can reduce or remove that insurance. Per the CFPB, private mortgage insurance is something you might be required to buy on a conventional loan with under 20% down. The borrower can request cancellation at 80% of the original value, and the servicer must end it automatically at 78%, subject to the Homeowners Protection Act conditions. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.

Selling appreciated stock may also create a tax event. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.

Path B: Leave the Stock in Place as Reserves

For reserves, Fannie Mae allows 100% of the verified asset value to count, and no liquidation is required. You do not have to sell anything to show the lender you have a cushion.

This matters for households with wealth concentrated in a brokerage account. Maybe you have enough cash for the down payment but want the portfolio to stay invested. Counting it as reserves can strengthen the file without a taxable sale. Retirement accounts work the same way: Fannie Mae does not require withdrawal when those funds are used for reserves, and retirement assets held as stocks or mutual funds follow the same valuation rules.

One distinction trips people up. A 401(k) or IRA is acceptable only if vested and if it permits withdrawal regardless of employment status.

Reserves interact with the credit side of the file. The wholesale conventional programs start at a 620 decision score, and the automated finding governs most files, with a total ratio ceiling of 50%. Manually underwritten loans run tighter ratio limits and lean on reserves and score factors. Strong reserves help most when a file is borderline. All of this is subject to lender guidelines and full file review.

Path C: Borrow Against the Stock, Then Use the Proceeds

You can take a securities-secured loan and put the proceeds toward the purchase. Fannie Mae accepts borrowed funds secured by an asset for the down payment, closing costs and reserves, because they represent a return of equity. The guide lists stocks, bonds, savings accounts, CDs and 401(k) accounts as assets that may secure such funds.

The lender asks for documents: the terms of the secured loan, evidence that the lender of that loan is not a party to the home sale, and evidence the funds reached you.

Payment treatment is the part borrowers misread. For loans secured by the borrower’s financial assets, Fannie Mae does not require the monthly payments to be counted as long-term debt. Other secured loans must be evaluated as debt, and if a loan has no required payment, the lender calculates an equivalent. So the debt carve-out is narrow, and it does not mean the obligation disappears from your real budget.

Two more cautions apply:

• If the same stock also counts toward reserves, the lender reduces its value by the loan proceeds and related fees. The dollars cannot count twice.
• Securities-based credit lines carry margin-style risk. Schwab describes them as secured by pledged securities in a separate brokerage account, with loan value typically up to 70% of eligible securities and risk similar to margin. If the portfolio falls, you may face a call for more collateral or a forced sale, right when you also own a new house.

That last point is the real flip condition. Borrowing against stock makes sense when you want to stay invested, can comfortably carry the extra payment, and could absorb a sharp market drop. Selling is the better call when your portfolio and your job are exposed to the same sector, or when the borrowed amount would leave little room if prices fall.

Path D: Use the Portfolio as Qualifying Income

Some borrowers have large assets and modest monthly income, often retirees or people between jobs. Asset depletion converts assets into a monthly figure. The agency rules are narrower than many borrowers expect.

Fannie Mae’s policy is titled “Employment Related Assets as Qualifying Income.” It applies to purchases and limited cash-out refinances on principal residences and second homes. The maximum loan-to-value is 70%, or 80% if the asset owner is at least 62 at closing. Co-owners must be co-borrowers, and any penalty on a full distribution is subtracted. A March update moved this content within the guide without changing its intent.

Freddie Mac has an update on the way. Bulletin 2026-10 revises its accumulated-assets-as-income section for settlement dates on or after February 3, 2027, with early adoption allowed. The bulletin covers eligibility, asset documentation, minimum value, the calculation method, and ownership and account value. Because the calculation details are changing, a broker should confirm the current version before you plan around it.

A plain-spoken read: do not assume any brokerage balance can replace income. Eligibility depends on account type, ownership, occupancy and leverage, and the two agencies differ. Ask early whether your specific accounts qualify.

Which Route Fits Which Borrower

Picture a first-time buyer whose wealth sits mostly in a taxable account with modest cash. Selling enough for a 5% or 3% down payment keeps the file clean, and the cushion test is easy to pass if the account is large. Leaving the rest as reserves adds strength without another sale. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.

Now consider a homeowner buying the next home who holds low-basis shares and expects a large tax bill from selling. A secured loan could bridge the down payment while the shares stay invested. That works if the household can carry the payment and a 30% market drop would not force a sale. If not, selling part of the position and paying the tax may be the calmer choice.

And take a buyer with a thin traditional employment income but a big portfolio. Asset-as-income is worth a conversation. But with the 70% leverage ceiling on the Fannie Mae method, the down payment requirement is far heavier than the standard 95% purchase lane. That is a real tradeoff, not a footnote. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.

Edge Cases That Change the Answer

• Margin debt. It reduces the value that counts, so a heavily margined account may be worth far less to a lender than the screen shows.
• Unvested options and restricted stock. Non-vested stock options are not acceptable for the down payment, closing costs or reserves, and should not be listed on the application.
• Government bonds. Value is based on purchase price unless the redemption value can be documented.
• Gift funds. A separate path for a principal residence or second home, subject to minimum contribution rules at higher leverage.
• Second home or rental. Occupancy decides the leverage: second homes run to 90% and investment property to 85% on one unit, so stock-funded down payments need to be larger there.
• Refinances. Verification of funds on a refinance depends on the cash you must bring and whether reserves are required.

Freddie Mac’s Guide Section 5501.3 covers securities, retirement accounts and secured-loan proceeds as borrower personal funds. Its documentation details vary by file type, so a broker should confirm them against your situation rather than rely on general rules.

Common Misconceptions

“The lender takes my stocks as collateral.” Not on a standard agency loan. The property secures the mortgage.

“I have to sell before closing.” Not for reserves. For the down payment, the 20% cushion test can remove the proof-of-sale requirement.

“My whole portfolio counts.” Margin debt is netted out, unvested equity does not count, and bonds may be valued at purchase price.

“A loan against my stocks never counts as debt.” The carve-out is specific to loans secured by financial assets. Other secured loans are counted.

“Pledged asset mortgages remove the risk.” They shift it. If pledged assets lose value, the lender may ask for more funds or limit trading.

How a Broker Helps Sort This Out

Across the wholesale programs Lendmire places files with, stock-heavy borrowers usually stumble on documentation, not eligibility. Statements are stale, margin balances are missed, or a secured loan was opened without the paper trail showing the funds moved to the borrower. Sorting out which route applies before you sell anything or open a credit line avoids costly rework. Lendmire’s conventional loan programs cover purchase leverage, mortgage insurance rules and score requirements, and the team can walk through how your accounts would be treated.

If cash is not the issue but timing is, Lendmire’s piece How to Use Sale Equity to Buy a New Build on a Conventional Loan covers a related situation where proceeds from one asset fund the next purchase.

If you are buying a home and want to see whether a conventional loan fits your file, Lendmire can help you compare the options and what each one asks of the file. All program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Fannie Mae Selling Guide B3-4.3-01, Stocks, Stock Options, Bonds, and Mutual Funds

2. CFPB, Ask CFPB: Private Mortgage Insurance

3. Schwab

4. Fannie Mae Selling Guide B3-3.4-06, Employment Related Assets as Qualifying Income

5. Freddie Mac Guide Bulletin 2026-10

6. Freddie Mac Guide Section 5501.3, Borrower Personal Funds