You might have caught wind of Fannie Mae's Announcement 07-22 dated December 5, 2007. That announcement established some new guidelines for lending in a "down market", the most impactive of which is the requirement for an additional 5% down in such a market. Example: the requirement will mean that a 100% loan (no money down) would then require 5% down. It only applies to loans with application dates on, or after, January 15, 2008, and only in down markets.
The guidelines require the lender to get the additional 5% if the appraiser notes in the appraisal that they are in a down market. If the appraiser does not make such a notation, "Fannie Mae strongly urges lenders to implement processes and apply supplement sources and tools to validate current housing trends and not rely solely on the information reflected in the appraisal." The lenders and appraisers can use the following services: Standard & Poor's - S&P/Case-Shiller® Home Price Indices , Office of Federal Housing Enterprise Oversight (OFHEO) , and National Association of REALTORS (NAR). There are other subscription/fee based services that they may use.
Also being implemented by some lenders is risk based pricing for conventional products. In such a situation borrowers with credit scores below 620 (or missing score - no credit established) would pay an additional 2 points. Credit scores of 620-639/1.75 points, 640-659/1.25 points, 660-679/.75 point. This is, of course, in addition to the normal punitive points and higher loan rate related to the lower credit score.
Our Advice: Recent conversation with an active local lender revealed that we are not locally in a "declining market". There are areas so identified across the nation, but nothing in our service area. Of course, this can change, we certainly have had a drop in our prices, and we have been told that some lenders are already treating our market as if it were in a "down" status, requiring the additional down of their borrowers. If you have limited funds for a down payment and are trying to time the market drop, we suggest that you act now to make sure that you can buy a home. If our area achieves a "declining market" status and you are caught with the requirement of additional down payment funds that you don't have, you might have to wait until the market starts rising again to buy your home. As the market rises the money you might have saved will certainly be lost - maybe forever if you are priced out of the market as we have seen in the past. We anticipate that the market will bounce high and fast when it turns - timing is the only question. Control your own destiny and get on with your life.
Save money and maintain a good credit score. Lenders still want to make loans - they are just exercising better discretion on who they make loans to than they have in recent years. Make yourself a desirable borrower and you, too, will enjoy the American Dream.
Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates, http://www.carsonvalleyland.com/ of http://www.carsonvalleyremax.com/ , 775-781-5472. Email us at CarsonValleyLand@hotmail.com
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