Is it legal to have a personal loan on top of a bank loan?

[Dirk Heite]

I offered an off market SFH in Oregon $510k, bank financed and a side $30k loan at $1500/mo. This was my creative way to meet her $540k asking price and my need to keep the loan below $484k so I can get a conventional loan. I plan on house hacking. Her initial reply was positive then she came back and said "I'm told that doing a contract outside of the sale contract isn't an option cause it actually would invalidate the sale contract. So many rules....🤦🏻‍♀️".

I do not know the laws, but I'm thinking the second $30k loan is just between her and I and should have nothing to do with the $484k loan with the bank. Am I wrong? If so, how can we do this legally?

[JD Martin]

It may be state specific but this is not allowed where I am either (TN). The $30k loan is material to the contract because it is in payment for the house. From the bank's point of view there needs to be a clean right to the property without anyone else claiming an interest later on (i.e. you don't pay her). I know that here, if someone loans/gives you the money for a down payment, it has to season for quite a while before you can use it in the purchase contract - and the bank is going to ask for an explanation of a big sum of money that hits your bank account right before you buy a house.