Declining markets - a thing of the past?
The folks over at Inman news found out that Fannie Mae, one of the beloved government sponsored enterprises (GSEs), will end their increased down payment requirements for property purchased in declining markets. This will change as of June 1. If you are thinking about purchasing a home, you will still need to come up with 3% down, but the additional 5% that was required starting this past January in areas where prices were falling will be eliminated, at least for single family homes.
Is this good news for home buyers? I would say yes. Hopefully this will ease a bit of the credit crisis as well. However, if private mortgage insurers do not go along with the changes, there will still be trouble. Anyone not putting at least 20% down is required to pay private mortgage insurance (PMI), and the insurers were not approving deals in these same declining markets because of the restrictions imposed by Fannie and Freddie. If the insurers change their policies to reflect the changing ones of Fannie Mae, then we won’t see potential borrowers getting a ‘NO’ on their applications for loans. Time will tell.
Ask your loan officer if you have questions about these ever-changing guidelines, and if you don’t have a good relationship with a lender, ask your agent or anyone you trust for help. It is hard to get a loan at the moment, but seeking answers and being proactive is a great way to start.