If you can't afford coming up with a down payment, borrowing could be your ticket to homeownership.

4 ways to overcome a down payment dilemma

By: James Abbey, January 18, 2016

Coming up with cash for a home purchase isn’t easy. It’s a multi-layered process that starts out with the down payment. Last year, the average down payment among buyers was 15 percent of their home’s purchase price, according to RealtyTrac. That translates to about $57,700, up from $57,600 in 2014.

While some buyers may have this type of cash on hand, it isn’t common. Fortunately, there are a variety of ways you can obtain money for a down payment. Consider the following options:

1. Borrow from retirement

“Some 401(k)s allow for borrowing without penalty within certain parameters.”

One of the more common strategies is to borrow from a retirement savings account, like a 401(k) or Roth IRA. Dipping into a 401(k) prematurely can carry a financial penalty, as they’re meant to accrue interest over several years to help pay for the cost of living in retirement. However, several 401(k)s have provisos that permit borrowing so long as what’s taken out is replaced in a predetermined time period. That being said, though, the Consumer Financial Protection Bureau recommends carefully considering all your options before making the move

“The biggest benefit of saving in an IRA is the tax-free growth of investment earnings,” the CFPB stated in a recent announcement. “If you remove the principal to fund your down payment, you’ll have less money in the retirement account to grow tax-free. Your savings will not grow as quickly.”

CFPB suggests speaking with a financial advisor to see if this move makes fiscal sense.

2. Seek out a personal loan
People borrow money for a variety of reasons, be it for college through a student loan estimate or for financing a vehicle. A personal loan can also serve as a useful strategy for an initial down payment. The interest rate will be heavily dependent on your credit. The higher your FICO score, the lower your interest rate, and the easier it will be for you to pay off the principle amount. You may want to consider seeking out a free copy of your credit report before applying for a personal loan. Everyone is entitled to one per year from each of the three credit reporting agencies.

3. Apply with FHA
The Federal Housing Administration is a government entity that has several different affordable financing programs that qualified borrowers can use. The average 30-year fixed rate mortgage stands at 3.9 percent, according to Freddie Mac. Eligible borrowers who go through FHA can get a mortgage quote for 3.5 percent.

4. Consider cash out refinancing
If you already own a home and a mortgage, you may be able to take advantage of its equity to pay for your next house. The strategy is called cash-out refinancing. After refinancing an existing loan, the additional amount that’s requested is tagged onto the new mortgage loan. The borrower then gets the difference in the two values. This money can be used for a variety of purposes, including a down payment, credit card debt or for out-of-pocket medical expenses that health insurance doesn’t cover.

Other down payment financing strategies include a home equity line of credit or selling your current house.