The biggest hurdle for most first-time home buyers is saving enough money for the down payment.
If you have not saved much, you may want to set aside funds for a down payment on a regular basis from your paycheck. Look at all the funds that are potentially available to you: your checking and savings account, mutual funds, savings bonds you have stashed away, stocks and bond funds, the cash value of your life insurance policy, and gifts from your parents or other relatives. It may even be saving from a part-time job that are devoted to your down payment.
If you do put less than 20% down, you may be required to purchase private mortgage insurance or PMI, which helps protect the lending institution in case, you fail to make payments on your mortgage.
Typically, these costs will be added to your monthly mortgage payments and to your closing costs. In helping you decide how much money you feel comfortable paying as a down payment, you should think about the many other expenses that go along with guying a home. There will be moving expenses, and any home repairs you might need to make immediately, and home decorating costs. You should try to avoid moving into the home of your dreams with a savings account on empty. It is a good idea to have two or three months of mortgage payments saved in a cash reserve when you apply for your mortgage.