One of the wisest decisions a homeowner can make is about saving enough to have a significant down payment available at the time of purchasing a new home. This way you can not only get the best possible interest rates but you can also avoid a significant down payment. However, a traditional mortgage typically requires that the buyer provide a down payment of at least 20% of the value of the home. Since this easily amounts to tens of thousands of dollars, it is natural for a potential buyer to be worried about arranging for the necessary down payment. For example even you are looking at a home priced at around $250,000, you are looking at something like $50,000 as a down payment.

The good news is that if you do pay this down payment, the lender will not ask you to purchase any private mortgage insurance. Also, you will have instant equity in your new home and this could prove to be valuable when you decide to sell your home at some point in the future. Of course, as we have mentioned earlier, the thought of having to save such a large sum can be daunting.

Let us take a look at some of the more common sources for down payment. You should begin by contacting the Federal Housing Administration as well as the state housing authorities for advice in this matter. They can guide you to programs that help first-time homeowners and also families with low to moderate income to get a mortgage with a lower amount of down payment.

If you have been contributing regularly to your 401(k) or 403(b) plans, it is possible that you may be allowed to take a loan to buy your new home. Similarly, if you have an IRA account, you could take a look at provisions that allow you to make withdrawals, especially if you are a first-time homeowner.

You should look at saving some money every month from your income towards the down payment. If you are already doing so, you should ensure that you are earning a reasonable amount of interest on it. Never let your money sit idle - a savings account that earns less than 1% interest does not help you reach your savings goal faster. Look at other investment options that will help you earn more on your savings.

Before looking at various investment options, you should have a clear idea of when you plan to buy your home. If you intend to do so within the next few years, then you should take a look at money market accounts or even high-yield savings to provide you better rate of returns. You could also look at certificate of deposit (CD) that offer less liquidity and flexibility but certainly provide better yields.

By planning well in advance, having a clear idea of what your savings goal is and how much you need to save every month to reach your goal and also by ensuring that your savings have been invested well, you should be able to have enough money in hand to afford a down payment on your new house.