Just about everyone took a hit when the housing bubble popped and the federal government was no different. As proof, the Federal Housing Administration has racked up more than three billion in losses associated with insuring nearly a fifth of all home loans during the time that the housing market was in free fall. In an effort to recoup their losses, the agency has instituted a new mortgage insurance policy that makes low down payment options from private lenders for first-time homebuyers an increasingly attractive option.

For the past couple years, the FHA has been slowly nudging up the costs of homeownership by periodically raising mortgage-insurance premiums however, in June of this year they instituted a policy that can significantly raise the long term cost of buying a home by requiring that borrowers maintain mortgage-insurance coverage over the entire life of the loan. Previously, this requirement was lifted after 22% of the value of the home was paid off and the risk of default was significantly lowered.

With these new provisos in place, exploring low down payment options from private lenders for first-time homebuyers can potentially save thousands of dollars off the total cost of the loan. As always, FHA loans are attractive because of their 3.5% low down payment requirements and the ability of those parties with less-than-stellar credit to obtain financing.

That being said, for those with the financial wherewithal to pony up the additional funds for a down payment that are mandated by private lenders, typically between 5% and 10%, a conventional loan from a private lender may be the most affordable entry into home ownership due to the increasing costs associated with an FHA loan.

It has been estimated that a first time homebuyer would stand to save more than $13,000 over the FHA borrower after a decade of steady payments. With private lenders looking to reassert themselves in the housing market, their entry provides low down payments options from private lenders for first-time homebuyers as a way of countering costly fee hikes associated with getting an FHA loan.