How to Use Stock Sale Proceeds as a Conventional Loan Down Payment

The Quick Read: Stock sale proceeds are not a separate loan type. They are a source of funds, and conventional loans accept them when the stock is vested, owned by the borrower and verifiable. Whether you must actually sell the shares before closing depends on how much the account holds compared to the cash the purchase needs. Sell without a plan and you can trigger a large-deposit question, a tax bill, or both.

What Does “Stock Proceeds as a Down Payment” Actually Mean?

It means the cash for your down payment comes from selling investments rather than from savings. The loan itself is a normal conventional mortgage. The stock only matters as the place the money came from.

This also differs from borrowing against a portfolio. A margin loan or portfolio line adds a liability. Fannie Mae’s rules require lenders to look into any sign of borrowed funds, so borrowing against shares to fund a purchase gets scrutiny that selling shares does not.

The buyer’s own money also has a leverage role. The conventional loan programs Lendmire arranges through wholesale lenders allow 97% LTV (3% down) on a one-unit principal residence for a first-time buyer with a fixed rate, and 95% LTV (5% down) otherwise. Mortgage insurance applies above 80% LTV. A larger down payment from stock sales lowers the LTV, and that can reduce or remove mortgage insurance. Every figure here is subject to lender guidelines and full file review.

Which Stock Assets Count and How Are They Valued?

Vested stocks, government bonds and mutual funds are acceptable for the down payment, closing costs and reserves, as long as their value can be verified. That is the rule in the Fannie Mae Selling Guide on stocks, stock options, bonds and mutual funds. The lender also has to confirm you own the account.

Valuation works like this:

• Stocks and mutual funds. The lender uses the most recent monthly or quarterly statement, net of any margin balance. A stock certificate plus a newspaper stock list dated near the application also works. The lender does not use a live market quote.
• Vested stock options. Value is based on the gain you would realize if you exercised and sold.
• Non-vested options. Not acceptable for down payment, closing costs or reserves. They should not be entered on the application.
• Government bonds. Valued at purchase price unless you can document the redemption value.

Operators see the same mistake often. A borrower with a large unvested RSU grant counts it in their head as available money. The underwriter gives it zero. Count only what has vested.

The 20% Rule: Do You Have to Sell Before You Apply?

Not always. Under Fannie Mae’s rule, if the asset’s value is at least 20% more than the funds needed for the down payment and closing costs, you do not have to document actual receipt of sale proceeds. If it falls short of that cushion, the lender needs evidence the proceeds actually arrived. This rule appears in Selling Guide Announcement SEL-2015-07.

Freddie Mac covers the same ground in Section 5501.3, “Borrower personal funds,” of its Seller/Servicer Guide. The structure is similar. The exact wording of the cushion test is not identical between the two agencies, so the lender’s investor decides which text governs your file.

One caution. Agencies have tightened this rule temporarily in the past, requiring proof of liquidation in all cases for a stretch. Ask your loan officer which version the investor applies today, and ask before you sell anything.

Three Account States, Three Sets of Questions

If your holdings clear the cushion, you may be able to leave the shares alone through application. If they do not, expect the lender to ask for proof the sale happened and the money landed.

How Is a Sale Underwritten, Step by Step?

Here is the sequence on a typical file.

1. Disclose the asset and the plan. Tell your loan officer which account funds the purchase and whether you plan to sell before closing. Statements must clearly show the financial institution and you as the account holder.

2. Document the value. Provide the most recent monthly or quarterly brokerage statement, net of margin. Lenders can also use a verification form or a third-party asset verification vendor.

3. Run the 20% test. Compare the account value to the cash needed for the down payment and closing costs. If the value clears the cushion, proof of sale may not be needed. If it does not, the lender asks for evidence of receipt.

4. Season the cash in the bank, if you sold. Proceeds land in a depository account, so the large-deposit rules apply.

5. Keep the property side separate. The source of your down payment does not change how the home is appraised. It only changes how much cash you bring, which sets the LTV.

6. Follow the findings. The automated underwriting findings list which deposits need documentation. The lender works from that report, and your job is to answer each condition with a clear document.

On proof of receipt, Fannie Mae’s page does not list specific document types. In practice, borrowers are typically asked for the brokerage sale confirmation and the matching deposit on the bank statement. Your lender will tell you exactly what it needs.

Large Deposits: Where Sold Stock Gets Questioned

A large deposit is a single deposit that exceeds 50% of your total monthly qualifying income, under the Fannie Mae depository accounts rule. On a purchase, if a large deposit is needed to complete the transaction, the lender must document that the funds come from an acceptable source.

A brokerage sale followed by a transfer to your bank is easy to trace when the amounts match. The file gets hard when the trail is muddy. Common triggers:

• Proceeds split across several transfers that do not add up to the sale.
• Money moved between multiple accounts before it reaches the one the lender sees.
• Earnest money paid from a different account than the one holding the sale proceeds.
• Sale proceeds mixed with a gift deposit.

The fix is boring. Sell, move the money once to your own account, and keep the sale confirmation with the statement that shows it. On a refinance, source documentation for large deposits is not required, though the lender still has to make sure borrowed funds are accounted for.

Where the General Rule Breaks

Several situations change the answer.

Retirement accounts holding stocks. Vested IRA and 401(k) funds are acceptable. If they are invested in stocks, bonds or mutual funds, they follow the same valuation and receipt-of-funds rules for the down payment and closing costs, per Fannie Mae’s retirement account guidance. For reserves, withdrawal is not required.

Unvested RSUs and options. Not usable. Vested options count by the gain on exercise and sale.

Margin loans. Value is net of the margin balance. Borrowing against the portfolio adds a liability the lender has to weigh.

Joint accounts. You must be an owner of the account. The lender may need confirmation that you have access to the funds.

Statement age. Asset documents carry age limits, and those limits have changed in the past. Check the current limit with your lender rather than assuming.

A gift of stock from a relative. This is a different path. The lender must verify the donor’s funds are in the donor’s account or have moved to you or the closing agent. Stock sale proceeds are your own funds, and gifts carry donor documentation and their own rules.

Minimum own-funds contributions. Some structures require a share of the down payment from your own money, and stock proceeds can satisfy that. A HomeReady one-unit principal residence above 80% LTV has no own-funds minimum, while two to four units require 3% under Fannie Mae’s HomeReady rules. When a grant is used on a two- to four-unit principal residence above 80% LTV, the minimum is 5% from your own funds under the grants guidance. HomeReady and Home Possible also carry an income limit of 80% of area median income. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

Occupancy. This article covers the home you will live in. Occupancy decides the leverage: a second home goes to 90% LTV, and investment property is capped lower. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.

The Same Dollars Hit the File Twice

Money you leave in the account after closing can count as reserves. Money you spend on the down payment cannot. So a larger down payment lowers the loan and the LTV, but it also leaves less behind for reserves.

Reserve requirements come from the automated findings and the Eligibility Matrix, and they vary by file. If you are near a threshold, ask your loan officer to run the file both ways before you decide how much to sell. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.

Credit and ratios still apply to the loan. 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 use 36% or 45% with the reserve and score factors in the matrix. Stock proceeds do not change those thresholds. They change your LTV and your cash position.

Taxes, Market Risk and the Sell-or-Keep Decision

Selling appreciated stock can create a tax bill, and that bill reduces the cash available for the purchase. Gross proceeds are not net usable funds. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.

Think through the decision in three parts:

• Do you need to sell at all? If your holdings clear the 20% cushion, selling may not be required at application. Ask first.
• How much cash do you need? Work out the down payment and closing costs, then see whether a bigger down payment pays off through lower mortgage insurance or a smaller loan.
• What about price swings? Shares can fall between the decision, the sale and closing. A statement valued at one level can look different later, so leave room in the plan.

Putting less down and keeping the stock is a legitimate choice. The tradeoff is mortgage insurance above 80% LTV against the tax cost of selling. Mortgage insurance can be cancelled on request at 80% of original value with good payment history, no subordinate liens and no decline in value, and the servicer must end it automatically at 78%. Whether that beats selling depends on your tax situation and how long you plan to hold the loan. This is a genuine toss-up on many files.

Key Terms Defined

Vested: Shares or options you fully own and can sell or exercise, as opposed to ones that still depend on a future date or condition.

Large deposit: A single deposit above 50% of your total monthly qualifying income, which must be sourced on a purchase.

Reserves: Verified assets left over after the down payment and closing costs.

Net of margin: The account value after subtracting any balance borrowed against it.

LTV: The loan amount divided by the property value, which falls as your down payment grows.

Own funds: Money that belongs to you, not a gift or grant, which some structures require as a minimum.

Common Mistakes That Stall a File

• Counting unvested RSUs or options as available cash.
• Selling before asking whether the 20% cushion makes the sale unnecessary.
• Moving the proceeds through several accounts.
• Ignoring the tax bill and coming up short at closing.
• Assuming the Fannie Mae and Freddie Mac wording is identical.

Lendmire’s related piece How to Use Down Payment Assistance With a Conventional First Mortgage covers the next question many buyers have, which is how assistance funds sit alongside your own 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.

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. Fannie Mae Selling Guide Announcement SEL-2015-07

3. Freddie Mac Seller/Servicer Guide

4. Fannie Mae Selling Guide B3-4.2-02: Depository Accounts

5. Fannie Mae’s retirement account guidance

6. Fannie Mae Selling Guide B5-6-02: HomeReady Underwriting Methods and Requirements

7. Fannie Mae B3-4.3-06 Grants and Lender Contributions