Depending on who you ask, you will get a different answer. You need to understand how Private Mortgage Insurance companies view our area...your LTV on your mortgage depends on it!
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Dear BuildingCredibility.com reader:
Your home may or may not be declining in value depending on who you ask. Your appraiser, local tax assessor, Realtor, and media outlet all seem to have a different take on that subject...and sometimes they are conflicting! Let's try to make sense of it from a mortgage qualification point of view:
ASSUMPTIONS: You are applying for a conventional conforming mortgage with a 97% LTV (loan-to-value). The 97% LTV means that you are attempting to mortgage 97% of your home's value or purchase price. In this scenario, a private mortgage insurance (PMI) policy will need to be taken out because you are financing more than 80% of the value or purchase price. Three different parties to this transaction have the opportunity to label the local housing market as declining in value. They are...
1) Fannie Mae/Freddie Mac -- When a mortgage approval is ran through one of these agency's guidelines, a message in the approval may indicate that the home is in an area where values are declining or difficult to determine.
2) Appraiser -- Your home's appraiser will indicate his/her opinion as to whether property values in the local market are increasing, stable, or declining.
3) Private Mortgage Insurance company -- There are many PMI companies (Radian, Genworth, MGIC, to name a few). These companies maintain their own lists of national housing markets and areas that they consider declining in value.
Although this guide is not 100% full proof, it mostly works this way: If one of the three parties listed above say that the local market is declining, your LTV on this transaction will probably be reduced to 95%. This is done to protect your mortgage lender and PMI company against the fact the future value of your home is probably going to drop.
If this were a purchase, you would be limited to a minimum of a 5% down payment. If this were a refinance, you would only be able to mortgage 95% of your home's value. How do you combat this if a higher LTV is needed:
-- Apply for a government (FHA/VA) loan where convention PMI is not used
-- Apply for a piggy-back 2nd mortgage (yes they still exist, although they are much tougher to get)
So, as a mortgage consultant, how have I seen these three parties so far? I have experienced Fannie Mae findings showing different homes in the Treasure Valley to be in declining markets. Not all PMI companies are labeling us as declining yet, but most are. I have not had an appraisal come back yet indicating that we are in a declining market yet.
So, is the Treasure Valley in a declining housing market? Like I said at the top...it just depends on who you ask.
If you have additional questions about mortgage loan or PMI guidelines, or are interested in talking about a mortgage for your home, feel free to call or email me at (208) 880-0316 and eric@ericsloans.com. You can also visit my website at http://www.ericsloans.com.
Warm Regards,