A few months ago the large Government Sponsored Enterprises (GSEs) -- quasi governmental entities that make up the "secondary" mortgage market - imposed declining market guidelines that forced lenders to require larger down payments in areas that were considered "declining markets". These were entire zip codes and entire counties, in some cases, that were deemed by the powers-that-be to have home prices falling so rapidly that a larger down payment was necessary to cover the risk of borrowers going into default.

While it makes sense for potential home owners to have 10% and 20% down payments (plus closing costs) in order to buy a home the grim reality is that very few people have the $30,000+ they would need just for a down payment on a moderately priced home in this area. Unfortunately, people just don't save the way they should (the US has a negative savings rate, by the way) which is exacerbated by our consumer culture of spend, spend, spend for everything from cars to TVs to clothes.

Now Fannie Mae has reversed it's declining market policy and will now be purchasing mortgages with as little as 3% down payments.

It's not time to jump up and down with joy yet. Mortgage insurers (the people who provide Private Mortgage Insurance or PMI on all loans with less than 20% down) still have to get on board to insure the loans with very small down payments.

Luckily, FHA does not depend on private mortgage insurers. FHA relies on Uncle Sam. FHA is also a 3% down payment loan and with down payment assistance from a charitable organization like the Nehemiah Program or Ameridream someone can actually buy a home with very little or no money. You can read the actual Fannie Mae press release if you -- Click Here.