When you set out to purchase a home consider the following:

• How much money should you save for the down payment and closing costs for the purchase of your home?
• Where is your down-payment money going to come from?
• How should you invest this money while you're awaiting the purchase and closing?

The 20 percent solution
It's recommended that buyers try to accumulate a down payment that represents 20 percent of the purchase price of the property. Twenty percent down is a safe number because it provides adequate protection for lenders and allows the buyer to avoid added fees and mortgage insurance.

If a buyer only puts down 10 percent, and property values drop 5 percent, the lender could be at risk. Lenders have found that they are in a safer position when a borrower has made a down payment of at least 20 percent.

Less than 20 percent and private mortgage insurance (PMI)
Banks and other mortgage lenders may require you to obtain private mortgage insurance (PMI) if your down payment represents less than 20 percent of the purchase price of the property. PMI protects the lender financially if the buyer defaults on the home loan.