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Declining Market Value

Mortgage and Lending with Grand Oak Mortgage Company

Regardless if you are a Realtor in the business or someone intersted in purchasing a home, it is important for you to understand what and how the Declining Market Value effects you.

With depressed home values and a record number of foreclosures in the state of Michigan lenders have taken steps to reduce the risk they face by deeming certain areas of the country as declining market.  The states most effected are; Michigan, Ohio, Florida, California, Nevada, and Colorado.

 Quite simply all conventional lenders have cut thier program by 5%. If you are able to get approved for a 100% program and are purchasing in a declining market area you will be required to put 5% down to purchase a home.  If you are only approved at 95% financing you will be asked to put 10% down.  This change effects every buyer, the days of purchasing a home with ZERO money down has passed.

It is important to get the word out to potential buyers that they will need to save some money before they are able to purchase a home.  The FHA loan progam is making a strong comeback, FHA only requires a 3% down payment and allows for 6% seller concessions.

I hope this information is useful and if you have quetions let me know.



Comments (4)

Paula Reno
Astro Realty (Buyer Agency) - Cedar Lake, IN
Broker, Owner - Cedar Lake Indiana Realtor, Astro

Thank you for the info Sean, this is must have info!!!

Mar 09, 2008 04:20 AM
Steven Fishman
Independence, OH


VA loans to 100% are not affected by the declining markets same as FHA loans . So Market your Veterans on 100% financing with no mortgage insurance either.

Mar 09, 2008 04:52 AM
Sean Landis
Grand Oak Mortgage Company - Grand Blanc, MI


You are 100% correct VA does offer the 100% program with no PMI, however, we don't see much of that in out area.  We are beginning to market both the FHA and VA programs much more.  As of now neither program has the declining market values, however, it would not surprise me if they "see the light" and make some program modifications to deal with the depressed housing market in certain areas.

Mar 09, 2008 07:08 AM
new FHA Plus and Declining Value Policy

Be careful here.

Word is slowing leaking out, investors (i.e. Wells Fargo) doing the NEW FHA loan amounts rates will be 3/8-1/2% higher AND ARE NOW implementing declining market policies/appraisals (5% reduction in LTVs) since these mortgages are pooled into the new  higher risk "hybrid Ginnie Mae II" MBS buckets. They're simply covering themselves since these securities may not be marketable, at all, after 12/31/08.

Example: 3% min FHA PLUS downpayment + 5% declining value = 8% minimum FHA PLUS borrower contribution.

Mar 28, 2008 04:20 AM