For many aspiring homeowners, coming up with a down payment is a significant obstacle standing in the way of homeownership. While having a 20% down payment isn’t required to buy a home, it can be challenging to gather enough funds to start the home buying process. Read on to learn about different ways to come up with a down payment.

Increase Savings

Saving money is perhaps the obvious first choice when it comes to collecting a down payment. The process of putting away extra money usually happens gradually, so it’s best to start a dedicated savings account as soon as possible. Increase your savings potential by creating and maintaining a household budget. You might also consider starting a side hustle or asking your employer for a raise to increase your cash flow. Growing your savings will be beneficial when you’re ready to begin your home buying journey, even if you find you won’t need much for your down payment. 

Down Payment Assistance 

Down payment assistance (DPA) programs are an underrated way to partially or fully subsidize your down payment. There are many DPA programs offered to homebuyers at the federal and state level, from both public and private institutions. DPA programs are often tailored to first-time or low-income buyers, but repeat homebuyers may be eligible for certain programs. The DPA funds can come in the form of a grant or a low interest second mortgage that may be repayable or forgiven after a set amount of time. If you’re part of a particular profession, such as teaching or law enforcement, there are DPA programs designed to help you become a homeowner. Taking advantage of DPA allows you to secure your dream home and save for other expenses. Make sure to ask your loan originator if you qualify for any down payment assistance programs.

Gift Funds

Your down payment doesn’t have to come entirely from you; all or part of it can come from family and friends in the form of gift funds. In order to use gift funds in your down payment, have your benefactor send your lender a gift letter detailing the amount given, their relationship to you, withdrawal dates, and a statement that repayment is not expected. Your lender may also need to see accompanying withdrawal and deposit slips to source the money. It’s important to know that if your contributor expects you to repay the gifted money, it will be considered a loan and will be factored into your debt-to-income (DTI) ratio. 

Leverage Your 401(k)

401(k)s are meant to be accessed upon reaching age 59 ½ , but tapping into it earlier can boost your down payment amount if needed. You can either use a 401(k) loan (if offered by your employer), or withdraw funds. Both methods allow you to access cash on hand without going through a lender or credit check. A 401(k) loan lets you borrow against your retirement savings and must be restored within five years with interest. Your employer may pause 401(k) contributions until the loan is paid back. Withdrawing money from your account will lead to a 10% penalty fee, and any amount you remove will be subject to an income tax. You will also forfeit any tax-free retirement earnings that you have accrued. For these reasons, this option is best used only as a last resort. It’s essential to consult with a financial advisor so you fully understand what’s involved. 

Getting a down payment ready doesn’t have to be the thing that stops you from achieving homeownership! If owning a home is something you want to accomplish, it’s ever too early to start saving and preparing for one of the most important purchases of your life.

NFM Lending is not a financial or tax advisor. You should consult a financial advisor to assist with your financial goals.

Note: This blog was originally published in June 2013 and has been updated.

Reaching the closing stage in the homebuying process is always exciting! Closing officially marks the beginning of your new life in your new home, but there’s more involved than just getting the keys–here’s what you can expect at closing.

Final Walkthrough

A few days before attending closing, you need to perform a final walkthrough of the home with your real estate agent. Final walkthroughs give you the opportunity to ensure there are no outstanding issues with the property and that the sellers made appropriate repairs if they were part of the negotiation. Check that major appliances, electricity, HVAC systems, and plumbing work properly. If you find something that needs to be addressed, it may delay the sale. Regardless of the home type or whether it’s a new build or is pre-owned, doing a final walkthrough is highly encouraged. It’s better to check beforehand than to sign the papers and discover a problem when you move in.

Reviewing and Signing Documents

At least three business days before your closing date, you’ll receive a closing disclosure (CD) from your lender. The CD gives a breakdown of your loan terms, loan costs, closing costs, projected payments, cash needed at closing, and more. Review your CD carefully to ensure you understand the loan terms and that everything is accurate. Even something as seemingly insignificant as a misspelling will be an issue if left uncorrected. If you see any errors or have questions, contact your loan originator immediately.

When you arrive at the closing table, bring a valid photo ID and proof of homeowner’s insurance. These will be needed to verify your identity and show that the property is protected from accidents. On closing day, you’ll be signing more key documents in the loan package, like the promissory note, the mortgage itself, the deed, title transfer papers, the bill of sale, and the notice of servicing disclosure. Your lender and real estate agent should inform you of all the documents you’ll need to sign and what they mean prior to closing. Let your real estate and lending team know if you see errors or are unsure about anything.

Pay Cash to Close

The cash to close consists of closing costs, the down payment, and prepaid costs (like HOA dues), minus any credits you receive. You’ll know the exact figure from the details in your CD; contact your lender if you see a mistake. If you’re paying any of these costs out-of-pocket, bring a cashier’s or certified check, or have the amount wired to the title company a day or two before closing. When doing a wire transfer, avoid scams by confirming the address directly with your title agent. After the money has been disbursed and all the documents have been signed,the property transfer will be complete. The title company or real estate attorney will submit the documents to your local government’s public land records for recording. Congratulations—you just closed on your new home!

It takes a lot of hard work to get to the closing table, so celebration is definitely in order!  No matter how eager you are to finish signing papers and get your keys, it’s imperative to take your time reading everything thoroughly. Having everything in order before the closing date will help reduce last-minute snags or surprises.

If you have questions about closing on a home, contact one of our licensed Mortgage Loan Originators. If you’re ready to begin the home buying process, click here to get started!

When you’re considering different home loan products, one key question you should ask yourself is whether you want a fixed-rate or an adjustable-rate mortgage (ARM.) Many people become entranced by the ARM’s lower interest rates, but there’s more to them than their attractive rates. Here’s what you need to know about adjustable-rate mortgages. 

What’s an Adjustable-Rate Mortgage?

Mortgages can generally be categorized into two types: fixed-rate mortgages and adjustable-rate mortgages. As their names suggest, the interest rate for an ARM is variable and can change over the life of the loan. ARMs are appealing because of their lower starting rate and the money-saving benefits during the beginning of the loan. It’s important to be financially prepared when the rate adjusts, as no one can predict how much they will change in the future. Having an ARM can become a problem if the rate increases to a point where you can’t afford to make payments. This element of uncertainty is why ARMs typically have lower rates than fixed-rate mortgages. 

Types of ARM Loans


Hybrid ARMs have an initial fixed-rate period (often for 5, 7, 10, or 15 years) during which you’ll pay the same interest rate you closed on. After that period ends, your rate adjusts to whatever the current rate is for the life of the loan. The rate adjustment period can vary depending on the loan. Hybrid ARMs have an interest rate cap that limits how much the rate can increase or decrease within a certain timespan. For example, a 5/1 ARM may be structured with a 5/2/5 rate cap where after the first five years, the rate can be up to 5% higher than your initial rate in the sixth year. After that, the rate can increase up to 2% from your starting rate for the rest of the term. The last number in the rate cap indicates the maximum the rate can increase during the life of the loan, which is 5%. Make sure you understand and consider the loan’s rate cap so you know how much you could be paying. Locking in a competitive rate for the first few years gives you time to build savings, and you could save even more if the rate drops in the future. 


With interest-only ARMs, you pay a lower rate upfront and only make interest payments for a certain amount of time. Your monthly payment will be lower since you’re just paying interest. Be aware that you won’t be gaining equity since your payment isn’t going towards the principal. After the interest-only span is over, you’ll be making interest and principal payments, while being subject to an adjustable rate. Interest-only ARMs also have rate caps. Make sure you understand the repayment terms, as some loans may require a balloon payment where the entire balance is due soon after the interest-free period. 

Is it Right for You?

Though fixed-rate mortgages are perennially popular, adjustable-rate mortgages can be a good fit for some buyers. An ARM works well for people with flexible lifestyles and finances. For instance, if you have a solid level of savings, you’ll have more breathing room if rates rise significantly. This loan can also be beneficial if you expect your income to increase within the first several years of owning your home. For those who don’t expect to live in their house long (like if you have a starter home), an ARM lets you take advantage of the lower rate and build equity when it’s time to sell. If you decide later that you’d rather not deal with a varying rate, look into refinancing to a fixed-rate mortgage. 

If the higher rates of fixed-rate mortgages are keeping you from becoming a homeowner, an adjustable-rate mortgage can be a helpful alternative. Even though your rate will change every now and then, the potential savings could make having a variable rate worthwhile. 

If you have any questions about the home buying process, contact one of our licensed Mortgage Loan Originators. If you are ready to buy a home, click here to get started!