Don't drain your savings
Spending all or most of your savings on the down payment and closing costs is one of the biggest mistakes first-time homebuyers make, says Ed Conarchy, a mortgage planner and investment adviser at Cherry Creek Mortgage in Gurnee, Illinois.
"Some people scrape all their money together to make the 20 percent down payment so they don't have to pay for mortgage insurance, but they are picking the wrong poison because they are left with no savings at all."
Homebuyers who put 20 percent or more down don't have to pay for mortgage insurance when getting a conventional mortgage. That's usually translated into substantial savings on the monthly mortgage payment. But it's not worth the risk of living on the edge, Conarchy says.
What to do instead
Aim to have three to six months of living expenses in an emergency fund. Paying mortgage insurance isn't ideal, but depleting your emergency or retirement savings to make a large down payment is riskier.
Source: Bankrate by Deborah Kearns