Well, in my adventure of trying to buy my first house, I've picked up tidbits of information hither and yon, and from what I understand it's like this:
- Once upon a time, in order to get a mortgage, you had to not only be able to put down 20% of the sale price of the house, but then lender also expected you to have at least 3 months' worth of your salary saved up and untouched, just in case.
- Not too many years ago, banks realized that there was a *huge* segment of the population that just couldn't save money, and just absolutely loved to charge things... and on top of that, pay absolutely no attention to anything they sign. That segment of the population has generally not been all that keen on purchasing houses because they simply couldn't get financing. Short story: lots of potential profits were not being made.
- The result of this was that lenders started caring less and less about how much money a person had set aside, and instead began focusing more on the customer's ability to repay and their likelihood of defaulting on the loan. Couple that with an intensely competitive banking market and a government that seems willing to give away the farm so that citizens can purchase their own home, and you create a situation where pretty much anybody can buy a house.
The short answer: no, you don't necessarily *have* to have money set aside. Some more conservative lenders like to see that you at least have some set aside, but at the end of the day, if you can pay the closing costs and the escrow, they really don't care all that much if you do. In fact, sometimes the entire cost of the loan (closing costs too) can be rolled into the mortgage, meaning nothing out of pocket. Ain't the banking industry grand?
