The Quick Read: Both routes are allowed on a conventional purchase, and neither one is “better” under the agency rules. Selling turns stock into cash and keeps the file simple. Pledging lets you keep the shares but adds a second loan, extra paperwork, and market risk. Selling suits most buyers. Pledging suits a smaller group with large holdings, a real reason to stay invested, and a stomach for the downside.
Here is the honest answer in one paragraph. If your stock has a modest gain, you want a clean file, or you can’t stomach a forced sale in a bad market, sell. If you hold a large position with a big embedded gain, you have plenty of other cash, and you can absorb a drop in value, pledging deserves a look. The mortgage rules allow both. What changes is how the funds are documented and how the new debt is counted.
Conventional payment estimate
The starting figures are an example price at the first-time buyer’s minimum down payment. Replace them with yours.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a conventional loan quote.
Estimate seeded at the low end of Fannie Mae’s published range (0.58%–1.86% a year); the insurer prices the actual premium on the score and the leverage. Applies only above 80% loan-to-value.
Illustrative starting assumptions: a $350,000 price, the first-time buyer’s minimum down payment, a thirty-year term at the current Freddie Mac benchmark, mortgage insurance at the low end of Fannie Mae’s published range, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a conventional loan quote; your rate is set by the lender at lock. The mortgage insurance figure is an editable estimate seeded from Fannie Mae’s published typical range, not a premium quote; the insurer prices the actual premium, and the cancellation month assumes scheduled payments with no extra principal and no change in value. Taxes, insurance and dues are editable estimates; closing costs are not included. Conforming loan limits apply by county. Licensed in sixteen states for consumer mortgages.
Side-by-Side
| Factor | Selling the stock | Pledging the stock |
|---|---|---|
| What the lender sees | Cash from a sale | A loan secured by shares |
| Leverage | Set by the loan program, not the source | Same program limits apply |
| Credit floor | Same program floor | Same program floor |
| Mortgage insurance | Above 80% LTV either way | Above 80% LTV either way |
| Occupancy | Program rules by occupancy | Program rules by occupancy |
| Documentation | Statement, proof of sale, deposit trail | Loan terms, ownership, proof of transfer |
| Extra debt in the file | None | A second loan, treated per agency rules |
| Market risk after closing | None on the sold shares | Falling values can trigger a collateral call |
| Reserves | Sold shares are gone | Pledged shares can’t also count as reserves |
Two notes on the table. First, the loan program sets leverage, credit floor, and mortgage insurance, not where your down payment came from. On a one-unit principal residence, the programs we place files with run up to 97% LTV for a first-time buyer and 95% otherwise. Mortgage insurance applies above 80% LTV. The wholesale floor is a 620 decision score. All of this is subject to lender guidelines and full file review.
Second, occupancy still matters. Second homes and investment properties carry lower leverage limits than a principal residence, so check which one you’re buying before you plan the down payment.
How Each Route Works
Loan officers hear the same question from buyers with brokerage accounts: “Can I just use the stock?” You can, but you have to prove the money is real, yours, and available.
The selling path
Fannie Mae accepts vested stocks, bonds, and mutual funds as a source of funds for the down payment, closing costs, and reserves. The value must be verifiable. The Fannie Mae Selling Guide says value is counted net of any margin balance, using your most recent monthly or quarterly statement.
In practice, the steps run like this:
1. You disclose the brokerage account on the application.
2. The lender verifies ownership and pulls the latest statement.
3. The lender checks whether proof of the sale is required.
4. The proceeds land in your bank account.
5. The lender documents where that deposit came from.
Step three has a cushion rule. Freddie Mac generally asks for evidence of liquidation when securities are needed to close. The exception applies when the combined value of the assets is at least 20% greater than the amount needed from them. The wording sits in Freddie Mac Guide Section 5501.3, and your lender will confirm how it applies to your file.
Step five matters more than people expect. A big deposit from a stock sale is a large deposit, and on a purchase the lender must document that it came from an acceptable source. Under Fannie Mae’s guide, a large deposit is a single deposit above 50% of your total monthly qualifying income when bank statements are used. That definition appears in an archived version of the Selling Guide, so your lender will confirm the current wording. The paper trail is easy when you move cleanly from brokerage to bank. It gets messy when money bounces between three accounts.
The pledging path
Fannie Mae treats borrowed funds secured by an asset as an acceptable source for the down payment, closing costs, and reserves. Its reasoning is that such funds represent a return of equity. Stocks, bonds, CDs, savings, and 401(k) accounts can all serve as collateral. See the Selling Guide section on borrowed funds secured by an asset.
The file needs three things:
- The terms of the secured loan.
- Evidence the lender making that loan is not a party to the home sale.
- Evidence the funds reached you.
Borrowing against financial assets has its own conditions. The secured loan must come from a financial institution, and only the funds above the loan balance count toward what you need to qualify.
The debt treatment is the part buyers like. Fannie Mae does not require the payment on a loan secured by financial assets to count as long-term debt. Freddie Mac’s debt-to-income section lets lenders exclude those payments from the monthly ratio when repayment can come from liquidating the asset. Other secured loans do count.
Read that carefully. It is a qualifying-ratio rule. It does not mean you owe nothing. You may still carry real payments and real risk, and they just don’t show up in the ratio the lender calculates.
Two more guardrails apply. The same shares can’t be counted twice. If you pledge them, the lender subtracts the pledged portion from your eligible assets, so they can’t double as reserves. And Freddie Mac excludes loans secured by cryptocurrency from its debt exclusion.
When Selling Is the Better Fit
Selling is the better fit for most buyers. It wins on simplicity, and simplicity counts for a lot when a purchase has a contract deadline.
Your gain is small, or you’re sitting on a loss. If the shares have barely moved, there’s little tax cost to selling. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
You want the cleanest file. A sale produces one traceable deposit. A pledge adds a second loan, a lender who must not be tied to the sale, and extra documents. More moving parts mean more places for a file to stall.
Your holding is concentrated or volatile. If one stock makes up a large share of your net worth, selling some of it to buy a home is also a diversification move. Pledging keeps all that risk on the table and adds a new obligation on top.
You need the shares as reserves. Pledged assets can’t count as unencumbered reserves. If your file leans on the portfolio for reserves, pledging can shrink the very cushion the lender wants to see.
You can’t stomach a collateral call. Selling ends your market exposure on those shares. Nothing the market does after closing can force your hand.
Your stock isn’t eligible to pledge or sell yet. Unvested options and undelivered restricted stock don’t count either way. Stock with limits on its accessibility is not eligible. Vested options are documented differently, with a statement showing the number of options and the option price. Fannie Mae then uses the current stock price to work out the gain you’d realize on exercise and sale.
One more practical point. Cash to close is the down payment plus closing costs, minus deposits and credits. The CFPB says closing costs typically run 2% to 5% of the purchase price, not counting the down payment. A sale gives you a known amount of cash against that number. A pledge ties your funds to a loan whose terms you need to understand first.
When Pledging Is the Better Fit
Pledging works for a narrower buyer. The profile looks like this: a large embedded gain, a long investment horizon, other liquid cash, and a clear plan for the downside.
You have a big gain and a reason to stay invested. Pledging can let you avoid triggering a sale now. It defers a tax event rather than erasing it, and a forced sale later could create one at a worse time. The IRS explains how capital gains and losses work, and a tax professional can tell you how that plays out for you.
You have other reserves. Because pledged shares can’t double as reserves, pledging works best when the lender can see reserves elsewhere. Without them, the plan gets tight.
The ratio treatment helps you stay under the ceiling. The wholesale conventional programs we place files with allow a total ratio ceiling of 50% on files that get an automated approval. If excluding a secured-loan payment under agency rules keeps you inside that ceiling, pledging can matter. The automated findings govern most files, so the lender will tell you how your loan gets treated.
The loan structure is clean. A secured loan from a financial institution, with documented terms and proof the funds reached you, fits the agency documentation. Sloppy structure doesn’t.
Now the downside, which is why this route is for a smaller group. Securities-backed loans carry real risk. FINRA warns of unintended tax consequences, the chance you may have to sell your holdings, and market swings that magnify losses. An SEC and FINRA investor alert describes the maintenance call: if your securities fall too far, you must post more collateral or repay within a set period, typically two or three days.
Picture a buyer who pledges a concentrated stock position, then watches the market drop after closing. The lender asks for more collateral. The buyer has little cash outside the pledge. Now the sale they wanted to avoid happens anyway, at a lower price, possibly with a tax bill attached. That is the scenario to run in your head before you choose.
Also know that some bank securities-based lines are “non-purpose” credit lines. The proceeds typically can’t be used to buy securities or pay down margin loans. That is a feature of the bank’s product, not a mortgage rule, but it can shape which loan you pick.
Finally, a pledged account may not fit Freddie Mac’s streamlined asset-verification path, which expects no outstanding loans secured by the listed accounts. Treat that as “may not qualify,” and ask your lender.
What Decides the Outcome
Whichever way you lean, the same handful of questions drive the file:
- Is the stock vested and unrestricted, with a value the lender can document?
- Does the file need liquidation evidence under the 20% cushion test?
- If pledging, did a financial institution make the secured loan, and is it documented?
- Are the pledged shares also needed for reserves?
- What do the automated underwriting findings say about documentation?
Where the down payment came from doesn’t change how the home is appraised.
One caution on scope. Treatment can differ by program and occupancy. A second home or a non-conventional loan may handle this differently, so ask before you assume.
Myths Worth Dropping
“You can’t use stock unless you sell it.” Not true. Borrowed funds secured by stock can be an acceptable source under Fannie Mae’s guide.
“Pledging is free money.” It isn’t. The risks above are real, and the loan has to be repaid.
“The whole portfolio counts at face value.” The pledged portion is subtracted from eligible assets.
“Any stock compensation counts.” Unvested options and restricted stock don’t.
“Large deposits don’t matter when I sell.” On a purchase, the lender must document the source of large deposits used to close.
“Selling is always taxed badly, and pledging avoids tax.” Neither is a safe statement. Pledging defers a possible event, and a forced sale can bring it back.
A Balanced Verdict
Selling is the default for a reason. It is simple, it is easy to document, and it ends your market risk on the shares you sell. For most buyers, it’s the right call.
Pledging earns a place when the holding is large, the gain is big, other reserves are solid, and the buyer can survive a rough market without a forced sale. This one is a genuine judgment call. The ratio treatment can look attractive, but “barely enough cushion” is the setup for a bad year.
A sensible middle path exists for some buyers: sell part, keep part, and avoid pledging more than you can comfortably cover. Ask your lender how each version would look in the file before you move any money.
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. Lendmire’s conventional loan programs are arranged through wholesale lenders, subject to lender guidelines and full file review. Nothing here is a commitment to lend. If your down payment is coming from family instead, Lendmire’s piece Standard vs. Income-Limited Conventional Loan for a Gifted Down Payment covers that path.
Key Terms Defined
Pledged asset: Stock or other holdings you offer as collateral for a loan while you keep ownership.
Liquidation: Selling an asset and turning it into cash.
Large deposit: A single deposit big enough that the lender must document where it came from.
Collateral call: A demand to post more collateral or repay when pledged securities lose value. Also called a maintenance call.
Vested: Fully yours, with no waiting period or forfeiture condition attached.
LTV (loan-to-value): The loan amount as a percentage of the home’s value or price.
Frequently Asked Questions
Can I use stock for a conventional loan down payment without selling it?
Yes, in many cases. Fannie Mae treats borrowed funds secured by stocks as an acceptable source of funds, with documentation of the loan terms and the transfer of funds. Your lender will confirm how the rules apply to your file.
Does a pledged-asset loan count against my debt-to-income ratio?
Often not for the secured loan itself. Fannie Mae and Freddie Mac both allow payments on loans secured by financial assets to be left out under their rules, with conditions. Other secured loans count. You may still owe real payments even when the ratio ignores them.
Do I need to prove a stock sale if I sell?
Often, yes. Freddie Mac asks for evidence of liquidation unless the assets exceed the amount needed by at least 20%. On a purchase, the lender also documents any large deposit used to close.
Can restricted stock or unvested options count?
No. Both agencies exclude stock with limits on access, including unvested options and undelivered restricted stock. Vested options are documented differently, using the option price and current stock price.
What if the market drops after I pledge?
You may face a collateral call, which requires more collateral or repayment, typically within two or three days per the SEC and FINRA alert. Without other cash, you could be forced to sell.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide: Stocks, Stock Options, Bonds, and Mutual Funds
2. Freddie Mac Guide Section 5501.3
3. Fannie Mae Selling Guide: Borrowed Funds Secured by an Asset
4. Freddie Mac Guide Section 5401.2
5. CFPB
6. IRS Topic no. 409, Capital gains and losses
7. FINRA
This article is part of Lendmire’s conventional loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a First-Time Buyer Get a Conventional Loan With Little Down? · Can a Buyer Get a Conventional Loan With a Small Down Payment? · Conventional Loan With PMI vs Waiting to Save a Bigger Down Payment
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.