Good morning! I hope everyone is well. I wanted to touch on the new buzzword in our industry "declining markets". This came about because last Friday I lost a loan to another lender who I believe may not have the necessary information to make the loan work. Once again, it's critical that we know what we're doing these days so as to avoid borrower, realtor, etc. disappointment.
Declining or soft markets are categorized by properties being on the market for more than 6 months. Also, please note that condo's are considered riskier loans than homes these days. For a list of all the criteria lenders use to determine a "declining market", log onto to their website, call your rep., or Google "declining markets". The bottom line is your client may not be able to borrow as much as they thought. For example, it looks like the loan I lost will need to put 10% down on their purchase rather than 5. This may kill the deal.
I'm curious if banks will follow the same critieria. It definitely puts a crimp in our arsenal. The one piece of good news is it appears FHA will not be affected. Of course if it's a condo. not all condo's are FHA approved. In sum, declining markets appear to be a way of life for the next several months. It could mean your borrower isn't able to borrow as much as they would like to. Do your due diligence so we're not all disappointed. Have a great day!
Paul McFadden
I had a FHA loan get flagged for a decling market. I still wonder if the lender was honest about that. We did switch the client with no problem but she lost her good rate.
Thanks, Endea, for your comments. It will be interesting to see when the market corrects.
Jon: That's good to know. I hope the loan I recently lost will be well informed and can get their loan done with 5% down. I kind of doubt it. Take care and have a great day!
Paul