You may have heard of this list of regions and zipcodes deemed to be "declining markets", meaning that home values are dropping in those areas. When a region is labeled as such, guidelines dictate that the maximum Loan-to-Value be dropped by 5%. So if a program allows for 100% financing, but the home is in a "declining market", the most the borrower can now take is 95%. The idea is to protect the buyer from becoming upside-down and also to give the lender increased protection in case of default.

Although this new policy does put a damper on refinances, the biggest hurt is to borrowers wishing to purchase. Many buyers want to put little or no money down and 5% of a $200,000 home is a decent chunk of change for most borrowers. Luckily, FHA is insulated from this policy. We can still do a 97% purchase and with the Nehemiah program, the seller can even agree to pay the remaining 3% of the downpayment ON TOP of up to 6% in closing cost assistance! FHA rates are also typically low and the seller is allowed to help "buy down" the purchaser's rate as long as discount point(s) are included in the contract as an item the seller agrees to pay.