Feb 26 2008
What is a “declining” market?
What is a declining market? It seems simple enough to explain, it is when real estate values are dropping in a market place. Basically all of the front range currently qualifies as a declining market. In the mortgage industry a declining market has major impact on the loans that we can do and how much you can borrow.
For example, if the home you want to buy is in a declining market conventional lenders require an additional 5% down payment. So a loan program that was 100% financing now requires 5% down or basically changes it to a 5% down loan. If you were required to put 10% down now it would require 15%. Remember almost all the front range is considered a declining market by Fanni Mae and Freddie Mac.
FHA and VA has not at this time required additional down payment in declining markets but appraisals are now being heavily scrutinized.
Jeff,
Great article, I just closed a Flex 100, that will not be available again after June 1st. This property was not in a declining market, but the appraiser was put through the mill to prove it was not declining. I think a prudent idea is to put additional time in the contract for approval of the appraisal as it is taking longer to get all the information required by the underwriters.