Can a home in a "declining market" affect the type of financing you can get?

Question

I'm a first time buyer buying a condo that sold for 79,900 with 4900 in seller concessions to cover closing costs with the remainder going to directly to me as cash back. After the appraisal, the mortgage company is trying to say that the condo is in a "declining market" so I have to now put 5% down because they won't give me 100% financing for "declining market" property. I've never heard of anything like this. Is this standard practice or should I I find another mortgage company?

Answer 1

A declining market is when prices of similar properties have shown a decline in increase in value. The lender is trying to protect it's investment.

You could always find another mortgage company, but it could delay your closing.

Answer 2

I would guess that the appraiser they hired made indications concerning devaluation of properties in your marketplace. Lenders are very cautious these days about how much money they will put forth on any specific property, since they have been pretty well beat up financially by the current rash of foreclosures and over extensions on market values.

You could try another mortgage company, or you could simply tell the mortgage broker to shop around for a different source of funds.

Answer 3

Actually, one of the largest banks in the country just issued a list that shows the areas they consider declining and they can decide as they look at your file reduce your LTV by 5%. Condo's can add a layer of risk to that statement since the condo market in many areas is softer than the single family dwelling market.

Also, be careful about cash back at closing. You do not state how much and it is illegal in most cases. So if your agent stated to you, we can raise your price $10K and give you that money back at closing - run!!!! You as well as the agent, the title agent and anyone else that is privy to that part of the transaction can be indicted for wire fraud and that is a federal offense. Just Google Jill Lehn and read her story while she waits to be sentenced to prison