What are you credit scores now? FHA Loans has a 3% Down Payment, and now you can ask for the seller to pay up to 6% of the Sale's Price, for your recurring and Non recurring closing costs. That is the lowest down payment going, unless one of you are a Veteran, and then you can get in with no Down Payment.
The FHA Loan will change to 3.5 % Down Payment on October 1, 2008, so you have to act fast. FHA Loans also allow for someone to Gift you the down payment, also, but it has to be a Gift, so you don't have to pay it back.
Now is the time to buy, because it is almost impossible to guess when the market is going to bottom out, and when it does, the prices start right back up again, and it's harder to find a home. It becomes a seller's market, and it's harder to get the sellers to pay your closing costs.
I'm basing this on 33 years experience in the Real Estate Industry, and I've seen just about every market out there. So my advise is Buy now.
I hope the answered your Question.
Have a Great Day.