The Flip Answer - As much as you can afford
The Truth - Somewhere in between
Washington mortgage pro Rhonda Porter explains that 100% and 97% loans are still available for those strapped for cash. (Update as of July 2008 - the lending world has changed quite a bit this year. 97% loans are now only available through the FHA program and 100% loans are history. See my July 24 post for more info on this.)
FHA loans are a great option for first time buyers and those with little or no credit history. Arizona's Mortgage Guru Shailesh Ghimire explains the whole kit and kaboodle.
(These links are a bit old but still true.)
Are you a first time buyer with shaky/no credit AND not a lot of moola? An FHA loan in combo with a Down Payment Assistance program is a great option that lets you take advantage of the buyer's market metro Phoenix is currently experiencing. Many sellers are anxious to take down their rusting For Sale sign, meaning buyers can ask for assistance with closing costs, down payments and just about anything else. A first time buyer just bought one of my recent listings -- an upscale 1400 square foot urban condo -- for about $2,200 total cash.
Think you can't afford to buy a home and take advantage of this supreme buyer's market? Think again. Then call me.
Updated May 2008 - The credit markets are still reacting to the new paradigm and loans are a little more difficult to get. In general, lenders will either want 5% to 10% down. Haven't got that much? Who does? If you don't have tons of cash laying around, FHA loans are still the way to go. Sellers are still willing in many cases to negotiate a deal that includes the seller making your down payment for you. The Maricopa County Bond/IDA program is still out there giving buyers their down payment. If you're going to stay in your new home for at least 3 to 5 or 7 years, and you're emotionally/financially ready to be a homeowner, now is actually a super time to be buying a home. Even if you're a little cash strapped.