Can You Get a Loan for a Down Payment? What to Know

Key takeaways

• You can borrow money for a down payment, but lenders often discourage it because it raises your debt-to-income ratio.
• Additional debt can reduce how much mortgage you qualify for.
• Alternatives like down payment assistance or gift funds are often better options.

Can you borrow money for a down payment?

Saving for a down payment is one of the biggest hurdles in buying a home, and many buyers ask: can you get a loan for a down payment? The short answer is yes, but most lenders will either discourage or restrict it.

When you apply for a mortgage, lenders evaluate your debt-to-income (DTI) ratio, the percentage of your gross monthly income that goes toward debt payments. Taking out a separate loan for your down payment adds to that debt load, which can push your DTI above the preferred 36% threshold and make it harder to qualify for your primary mortgage. The more debt you carry going in, the riskier you look to lenders.

In addition, many mortgage programs require your down payment funds to come from your own savings, approved gift funds, or assistance programs. Borrowed funds are typically only allowed if the loan is fully disclosed and included in your debt-to-income calculations.

Even so, there are several ways buyers access funds for a down payment without jeopardizing their mortgage approval. Below, we’ll walk through your best options.

Where can I get money for a down payment on a home?

It depends on your situation. If you don’t have cash available for a down payment, there may still be options. Start by sharing your full financial picture with your lender, including whether you plan to use one of the financing options listed below.

1. Down payment assistance programs (DPAs)

Many states and local governments offer down payment assistance programs designed to help first-time homebuyers. These programs can come as grants, forgivable loans, or deferred payment loans. Unlike borrowing from a bank, DPAs often do not add to your monthly debt. You can explore available programs through the U.S. Department of Housing and Urban Development (HUD).

Some loan programs, including FHA loans, may also make it easier to use approved assistance programs or gift funds toward your down payment.

Pros:

• Can cover part or all of your down payment
• May offer lower interest rates or no repayment at all
• Often combined with education programs for new homeowners

Cons:

• Income or credit limits may apply
• Some programs require you to live in the home for a set number of years

2. Using home equity (for current homeowners)

If you already own a home, you might consider a home equity loan or line of credit (HELOC). This type of borrowing uses your existing home’s equity as collateral and usually offers lower interest rates than unsecured loans. 

Pros:

• Lower interest rates compared to personal loans
• Fixed or flexible repayment options
• Can be used for any purpose, including a down payment

Cons:

• Requires sufficient home equity (usually 15% to 20%)
• Your home is used as collateral, creating foreclosure risk if you default

3. Piggyback loan (80-10-10 loan)

A piggyback loan, also called an 80/10/10 loan, involves taking out two mortgages at the same time—one for 80% of the home’s price and a second for about 10% – allowing you to make a smaller down payment. This strategy can help buyers avoid private mortgage insurance (PMI), which is typically required when putting down less than 20%.

Pros:

• Avoids PMI
• Can reduce your primary mortgage size
• Builds home equity faster

Cons:

• Adds another monthly payment
  Often carries a higher interest rate than the main mortgage

4. Borrowing from your 401(k) or IRA

If you have retirement savings, you may be able to borrow from your 401(k) or withdraw from an IRA for a down payment. The IRS allows first-time homebuyers to withdraw up to $10,000 from an IRA penalty-free. However, borrowing from your retirement can slow your investment growth. You can review current guidelines through the IRS First-Time Homebuyer Rules.

Pros:

• Fast access to funds
• No credit check required
• If you take a 401(k) loan, the interest you pay goes back into your retirement account.

Cons:

• Reduces retirement savings and investment growth
• Repayment rules can be strict
• Tax penalties may apply if not repaid properly

5. Gift funds from family or friends

A common alternative to taking a loan is using gift money from relatives. Lenders allow down payments from gift funds, but you must provide a signed gift letter confirming that the money does not need to be repaid. For additional context on gift rules, see Rocket Mortgage’s Guide to Gift Funds.

Pros:

• No repayment or added debt
• Can improve your DTI ratio
• Faster access to homeownership

Cons:

• Requires lender-approved documentation
• Potential tax implications for the donor

6. Delay your home purchase and continue saving

If you’re not in a rush to buy, waiting a little longer can be one of the simplest ways to build your down payment. Taking extra time to save may help you avoid borrowing money or taking on additional debt before applying for a mortgage.

Even a few more months of focused saving can make a difference. Setting aside tax refunds, bonuses, or a portion of each paycheck can help your down payment grow steadily. Some buyers also open a dedicated savings account to keep their home funds separate and easier to track.

Pros:

• Avoids taking on additional debt
• Improves your debt-to-income ratio
• May strengthen your mortgage approval chances

Cons:

• Delays your home purchase timeline
• Home prices or interest rates could change while you save

What types of loans don’t require a down payment?

Most mortgages require a down payment, but a few government-backed loans allow qualified buyers to purchase a home with none. Keep in mind that even with a zero-down-payment loan, buyers still typically need to pay closing costs and other upfront fees.

VA loans

Available to eligible service members, veterans, and surviving spouses, VA loans require no down payment, though most borrowers pay a one-time funding fee. These loans also tend to offer competitive interest rates and don’t require private mortgage insurance (PMI).

USDA loans

USDA loans help low- to moderate-income buyers purchase homes in eligible rural areas and also offer no down payment options, with income and location requirements. Homes must typically be located in USDA-designated rural areas, which can include some suburban communities.

Down payment loan FAQs

Can you use a personal loan for a down payment?

Technically, yes, but most mortgage lenders will not allow it. Personal loans increase your debt load and affect your DTI ratio, reducing your mortgage approval chances. Learn more about mortgage lenders and approvals.

Does a home loan cover the down payment?
No, your mortgage loan covers the remaining cost of the home after the down payment. You must have the down payment funds available before closing.

Can you finance a down payment?
In limited situations, yes, but most traditional lenders do not allow it. Down payment financing can be viewed as risky, making approval more difficult.

Final thoughts: Weighing your options wisely

While it is possible to take a loan for a down payment, most lenders prefer that funds come from savings, approved gift funds, or down payment assistance programs. Borrowing increases your DTI ratio and can make mortgage approval more difficult. Instead, explore down payment assistance programs, gifts, or other creative savings strategies to help you reach your goal.

Ultimately, the best approach depends on your financial health, income stability, and long-term homeownership goals. By planning ahead and comparing your options, you can move closer to owning your home without taking on unnecessary debt.

Next step: Use the Redfin Home Affordability Calculator to estimate how much house you can comfortably afford based on your income and down payment savings.