How to Borrow Money for a Down Payment

Posted by in Loans | Updated on May 25, 2023
At a Glance: The standard down payment for purchasing a house is typically 20% of the total price. However, other factors such as loan type and first-time homebuyer programs can affect the required amount. Down payments are also necessary for auto loans, but there is no fixed standard. It is possible to obtain a loan for a down payment through options like borrowing against equity, borrowing from friends and family, borrowing from retirement funds, or using a personal loan. Each option has its own advantages and disadvantages. Personal loans are generally not accepted as a form of down payment by mortgage companies, but there may be rare exceptions in certain circumstances.

You want to take a mortgage, but as you’re about to do so, you notice that you don’t have the necessary amount of cash to make a down payment.

What do you do, then? Can you borrow money for a down payment?

Usually, about 43.2% of the people in the U.S. make a 20% down payment. If you want to be one of these people, but your financial situation is quite tricky, then you can borrow the money for the down payment.

How Much Do You Need for a Down Payment?

The amount of cash you need usually varies. There is a standard down payment, specifically 20% of the total price. This type of down payment works best for when you purchase houses. That being said, if you purchase a $500,000 house, then you will have to make a down payment of $100,000.

However, it’s not always that you need to make a 20% down payment. Houses are not the only purchases that require down payments. You may also need a down payment for an auto loan, which makes it harder to think of a standard down payment.

And even with houses, there are cases when first-time homebuyers don’t have to make a 20% payment. Thanks to the Federal Housing Administration, they might only have to pay a 3.5% down.

Therefore, it’s hard to know for sure what loan amount you are going to need to make your down payment. You should consider what purchase you are going to make, first.

Can You Get a Loan for a Down Payment?

Yes, you can get a loan for a down payment. There are several loan options you can explore to cover a down payment, including:

  • Borrow Against the Equity in Another Property
  • Borrow from Friends and Family
  • Borrow from Retirement Funds
  • Borrow Using a Personal Loan

Each of these down payment loan options has pros and cons, which are discussed in detail below.

4 Ways to Get Down Payment Loan

If you want to get a loan for a down payment, then you need to know the best ways to do so. There are a few methods, each of them with its own benefits and drawbacks.

Borrow Against the Equity in Another Property

A good way to make a down payment is by using equity from an existing property to buy another house. Thanks to being low-cost, you can easily use it as funding for home buying. That being said, if you’ve found a good offer for a house and don’t want to miss it, you can simply try leveraging your home’s equity, as it’s not expensive. Home equity products are also advantageous thanks to the lowest consumption rates on the market.


  • A very cheap method
  • Allows you to get cash for down payment very quickly


  • If you want to liquidate it for an emergency, it takes time

Borrow from Friends and Family

One of the best ways to get some cash for a down payment is by borrowing from your friends or family. After all, they love you and want to see you prosper, right? In case your relatives or friends have the ability to help you, then that’s an easier option since you work with people you can trust instead of a stranger like a lender.

You may also be gifted the money, which is a good option if you don’t want to pay the cashback – but if you’d feel bad about this, you can choose to borrow. Just keep in mind that the institutional lender or bank may add this to your debt burden and they will take this into consideration when deciding if they should or shouldn’t give you money.


  • Borrowing from people that you trust
  • Not being as stressed when it comes to repayment


  • Banks and lenders will take this into account when deciding if they should give you cash
  • You’ll still have to pay off the amount one day
  • May lead to poor relationships if you don’t repay the money

Borrow from Retirement Funds

Another great way to get some cash for your down payment is by borrowing from retirement funds. Your first thought now might be about the penalties you will have to deal with for withdrawing before the retirement age, but you’ll be surprised. If you are about to buy your first house, then certain qualifications may allow you to take out about $10,000 from your Roth IRA on a one-time basis, which is very helpful. There will be taxes to pay, but no penalties, thankfully.

A 401(k) plan might also allow you to borrow up to $50,000 of cash. It all comes down to how much you have available, but you will have to pay it back until a certain time. You need to talk to your retirement plan administrator and employer to find out what would happen if you leave the job during the repayment period. You also need to find out the rules about repayment.


  • You can borrow a decent amount of money
  • Roth IRA has no penalties


  • If you borrow from your 401(k), you will have to repay the amount within a reasonable time

Borrow Using a Personal Loan

Personal loans are pretty much the “fastest-growing form of consumer lending”, at least in the U.S. Personal loans are such a used method because they are very helpful, mostly because depending on the type of personal loan you get, you won’t be asked what you are going to use the loan for. The lender cares about whether you can repay it or not, so they look at your credit history and anything of the sort.

Using a personal loan is rarely accepted as a form of down payment, though. The problem doesn’t come from the lender but from the mortgage companies. The reason is the fact that you are basically taking new debt in order to be able to pay for your existing one. This may be a sign that you will be unable to afford the home loan. Down payments are required as proof that you have financial stability for this.

There are rare cases when a personal loan may be allowed, though – and we’re talking about extreme situations. In general, it can be used when you are moving for a job, and when you have money coming in, but you really need to make an offer at this moment.


  • It’s a good option in emergency situations
  • Lenders don’t care what you use the loan for


  • Most of the time, it is not accepted as a down payment

3 Simple Steps to Applying for a Down Payment Loan

If you are considering applying for a personal loan for a down payment, just follow these 3 simple steps.


Apply online for the loan amount you need. Submit the required documentation and provide your best possible application. Stronger applications get better loan offers.


If your application meets the eligibility criteria, the lender will contact you with regard to your application. Provide any additional information if required. Soon you’ll have your loan offer. Some lenders send a promissory note with your loan offer. Sign and return that note if you wish to accept the loan offer.


The loan then gets disbursed into your U.S. bank account within a reasonable number of days (some lenders will be as quick as 2-3 business days). Now you need to set up your repayment method. You can choose an autopay method online to help you pay on time every month.

Down Payment Assistance Programs

In some cases, you may be able to seek help from a down payment assistance program. This is a good way to get some funding if you’re a low-income homebuyer or it’s your first time purchasing a home. There are home-buying programs that will help you with the down payment, but the state could also help you. As long as you qualify, you might receive help from them.

Of course, it’s important to know that every assistance program is different, and each one might be able to help a home buyer depending on the amount of the down payment. For instance, there is the MyHome Assistance Program, which is able to offer loans up to 3.5% of the purchase price.

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