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Declining Markets "Declining Markets"One of the ways mortgage lenders (also known as "bond markets") are attempting to reduce their exposure to future losses on foreclosures is by limiting the amount of money they lend on properties that are identified as being in "Declining Markets". While I haven't seen a specific list of the areas that have been shrouded as declining markets, I'm pretty sure that the entire state of Florida is included, and I would guess that most of the other contiguous 48 states are as well (maybe things are still rosy in the other two). The "declining markets" designation means that the maximum amount that can be borrowed against a property is lowered by five percent, which means that a buyer who needed to put down 10,000 pre-correction dollars now needs to put down $20,000 in order to purchase a $200,000 home. If that same buyer had planned on availing himself of one of the no down payment loans, he now will need to make a $10,000 down payment. This desire of the markets to have homebuyers ante up more to get in the game is perfectly understandable, although it is really just a return to the practices that had been followed for years prior to the real estate boom. The scary thing about this is that it severely handicaps a very large number of prospective homebuyers - first time homebuyers - which was one of the segments of the population that helped fuel the housing boom of recent years to begin with. Having those buyers on the sidelines means not only are they not buying, but also that the homeowners who were selling to the first-timers in order to move up to a larger house are stuck too. There are still programs available to persons with limited funds who have income and usually pay their bills, but their guidelines have tightened up as well. So the good news continues to be that real estate prices are low. The bad news is it's getting harder and harder to afford the bargains. Carl Trawick is a Mortgage Specialist and Licensed Mortgage Broker with the firm Access e*Mortgage. He can be reached at 904-343-1145 or ctrawick@nefcom.net |
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