If you are thinking about buying sometime soon, you will have to up your savings. Fannie Mae and Freddie Mac have changed their lending policies with regards to declining markets, including our area.
Email I received a few days ago from a lender.
click on image to enlarge
To determine declining markets (declining house values), the agencies use three different indicators: S&P Case-Shiller Index, NAR statistics, and Office of Federal Housing Enterprise Oversight [OFHEO].
Effective for mortgage loans with an application date on or after January 15, 2008, Fannie Mae restricts the maximum loan-to-value ratio and combined loan-to-value ratio for properties located in a declining market to five percentage points less than the maximum permitted for the selected mortgage product. [emphasis mine]
via Fannie Mae
What that means to you? If you are qualified for LTV 95/5 with 5 percent downpayment, and you are buying in a declining market, you will now have to "up" your DP from 5 percent to 10 percent.
Furthermore, lower credit score buyers will have to pay points in addition to the higher DP - if buying in a declining market and financed with conventional loans (up to $417.9k).
Also new for 2008, Risk based pricing for conventional products. Borrowers with lower credit scores will experience an add-on to the points as follows:
Below 620 (..or missing score) 2.00% 620-639 1.75% 640-659 1.25% 660-679 0.75%
There you go. It's back to basic: Save more money for your home and maintain good credit score.
