1. Aim for 20% down.
If you have less than 20% down, the mortgage company will probably require you to get private mortgage insurance. Some mortgage companies will let you put 10% down, but will require you to get a second loan for another 10% of the purchase price.
Make sure you set aside extra money for closing costs such as title insurance and mortgage fees, which can reach up to $5,000.
2. Open a separate savings account.
Open a separate account for your down-payment funds. This will make sure that your savings for the down payment isn’t intermingled with other savings and so you can keep track of how much you save.
3. Consider your time horizon.
If your goal is to buy a home in 5 years, think about putting your savings into a CD that offers a higher interest rate than a regular savings account. But make sure you won’t need the money because if you take out the money before the CD matures, you will be charged a hefty fee.
4. Get extra help.
There are several down-payment assistance programs for first-time buyers that are offered by banks, local governments and charities. Some employees of government agencies can get free grants.
5. Clean up your credit history.
Your credit history will determine the loan terms and mortgage rates you qualify for.