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The down payment on a home will vary according to the program the purchaser selects or is qualified for.

There are various types of mortgages designed to provide acceptable terms for the both the purchaser and the lender.

The market is currently experiencing a shift in lending practices due to the nationwide recession in Real Estate.

The shift has caused adverse affects for the home buyer. Purchasers seeking financing were able to easily obtain 100% loans, a product in the past that was reserved for the military, known as VA insured loans. This change requires purchasers to have more cash in order to qualify for a mortgage.

Another change in the lending practices that has caused a detriment for the mortgagees is the canceled program referred to "stated income". This program, also affording 100% financing was greatly desired in the market place; it allowed many to purchase homes that may have been unable under other program guidelines. The stated income product would allow a mortgagee to simply state what income was earned. This information was never verified with IRS. This type of loan is becoming extinct. The government wants to know that the stated income matches what is reported on tax returns. The program was inductive for people to color the truth about their income; mostly because of desiring a home they couldn't afford.

More conventional lending practices will become predominant in todays
market. Federal Housing Administration, or better known as FHA loans are becoming more in demand. These loans had become less desirable when the 100% programs were available. For a person that has very little cash, this is a good program for him to pursue. In most cases, less than 3% of the purchase price is required as down payment in the FHA loan. The seller can contribute up to 6% in closing cost for the buyer. The loan has some default recovery expenses tied in to the mortgage, know as
Mortgage insurance premium. The FHA loan remains as a good product for those short of cash.

Veterans may qualify for the loan most often termed VA. This is a true "no down payment required", and Sellers can pay all of the purchasers expenses to complete the sale. There is no default recovery expense tied into the loan MIP or PMI. There is a VA funding fee that is charged to the veteran. Most veterans can add the fee to the loan if the seller won't pay it. The veteran must qualify by creditworthy standards, as all applicants for a loan must do. Some veterans think the VA eligibility entitles them to a loan without regard of income nor creditworthiness. This of course is a fallacy.

Conventional financing usually requires a minimum of 5% down; a fee will be charged in the monthly note to pay for a default recovery expense known as PMI, or private mortgage insurance. This is similar to the fee charged by FHA. The greater the down payment on conventional loans the less the PMI fee. A 20% or more down payment exempts any PMI fee.

Loan programs change frequently and especially when the market is experiencing a down side. It is advisable to shop around for the lender that offers you the best product.

If you are purchasing a home, you should keep your Realtor advised as to the loan products your are considering. The Realtor plays a vital role in comparing products that other clients benefited from, and will be able to share the experience with you.

Learn more about this author, Barbara Dufrene.
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