On the day you actually buy your new home, in addition to your down payment and the prepaid property tax and homeowners insurance premiums , you'll need cash for various fees associated with the purchase. These expenses are known as closing costs and are paid by both buyers and sellers.

Some closing costs you pay up-front when you apply for a mortgage loan. That includes money for a credit check on all applicants and an appraisal on the property. Keep in mind that even if you don't eventually receive the loan, that money is not refundable.

Other closing costs are possible and should be considered when evaluating your financial situation. These may include, but are not limited to:

Your down payment is paid in cash and is not included as part of the loan amount . The bigger your initial down payment, the smaller your loan, which reduces the amount of your payments.

How much you'll put down depends on the cash you have available and the amounts you'll need for closing costs and prepaid property taxes and homeowners' insurance.

Mortgage plans have various down payment requirements and they can range from 0% down on a VA - Veterans Administration Loan - to between 3 and 5% down on a FHA - Federal Housing Administration Loan - to 20% down, the traditional amount for a conventional loan. In addition, special state programs for first-time home buyers may set different sums, which are usually lower than conventional financing.

If you put less than 20% down on most loans, you'll be asked to protect the lender by carrying private mortgage insurance (PMI) . Carrying PMI ensures that the debt is repaid if you default on the loan. This adds approximately an extra half a percent onto the loan.

FHA mortgages, in return for their low-down-payment requirements, also charge for mortgage insurance premiums (MIP).