Arizona Identified as a Declining Market: 5% More Down Payment Required

Mortgage and Lending with Lend Smart Mortgage NMLS#207208 NMLS 207208

 Attention Realtors and Home-buyers in Arizona:  We are in a market identified by Fannie Mae and Freddie Mac to be a moderate declining market. 

This is not the first time I wrote about this issue:Arizona Identified as a Declining Market: Appraisal Reviews Required, but because I am having more people contact me about this lately, I thought I would elaborate further.  Also, I found some other interesting blog posts who covered this exact topic and thought I would share their viewpoint.

The new rules are as follows: If a property is identified by the investor (Fannie Mae/Freddie Mac) through the approval process that it is in a declining area (usually by zip code) the loan will be reduced from its maximum loan amount by 5%.  This 5% test also needs to be met by an appraisal.  So if the property is NOT identified upfront by the investor, but the appraisal indicates the property is in a declining area, then it also gets reduced from its maximum loan amount by 5%. 

For example:  A contract is written for $200,000.00 and you are approved by the bank for 100% financing (maximum loan amount).  If the property is identifed as a declining market area, then the maximum amount the bank will borrow is reduced to $190,000.00. 

This does NOT mean that there isn't any 100% options.  I have heard too many lenders throw this verbiage around lately.  It just means if the borrower needs 100% financing, then we need to make sure the property is NOT in a declining area.  There are areas in Arizona that this rule does not apply to. 

Last, If you have a client that needs 100% but is looking in a declining market area, please remember that FHA loans are a great alternative.  FHA financing does NOT fall under this declining market rule.  The home just needs to appraise for the value your purchasing it for.  Also FHA allows Down Payment Assistance, so your client might be able to structure a transaction to get the same benefit as 100% financing.  I had a client recently use this option to get financing.

I hope this clarifies things a little more out there, since there is so much confusion on this topic. 

We are unique people out there.  We expect better then "would you like fries with that drink".  I just have learned to use my Midwest values and transfer them into my mortgage business.  If you are looking for something a little more unique in your next mortgage loan, please do not hesitate to get a hold of me. 

My name is Gary Miljour and this is what I do best.


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Gary Miljour, Licensed Mortgage Loan Originator: 







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Sandra Paulow
Aspen Properties, Inc. - Pinetop Lakeside, AZ
REALTOR, Associate Broker, GRI, SFR
GARY, Great post.  Thank you for enlightening us on this.  I too am concerned about this issue as things are dropping all over our area (The White Mountains) and I do think we are going to be seeing more FHA loans.  The only down side of them is the Seller Contributions to the loan costs and our sellers up here aren't used to that so it could be interesting.  Thanks for the info. 
Jan 25, 2008 04:47 AM #1
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer
YAY GARY!  VA seems to be the only 100% alternative in "declining markets".  All of Clark County, where the Las Vegas valley is situated is considered a "declining market".  FHA with DPA is a great alternative BUT (I hate but's!) homes that are priced well will get 100% or more of the asking price PLUS no concessions.  So, in a nutshell, that means no DPA or closing costs paid.
Jan 25, 2008 04:51 AM #2
Gary Miljour
Lend Smart Mortgage NMLS#207208 - Southern Pines, NC
Mortgage Originator NMLS Licensed in AZ and NC


Thanks for the comment, educating sellers up in your market will be the easiest ways to get a contract accepted using FHA.  Once the sellers see that they have to work with today's buyer to get their property sold, they will consider concessions.


Good to hear from you, I also am a big VA fan, but finding veterans can be tough.  It sounds like your buyers up there have to bring in some funds to close.

Jan 27, 2008 05:34 AM #3

My loan officer recently said that I need to have a 10% down on a 300,000. home due to AZ being a declining market. Is this true for all lenders or just well fargo?

Apr 07, 2009 03:58 AM #4
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Gary Miljour

Mortgage Originator NMLS Licensed in AZ and NC
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