New rules will impact buyers with low downpayments. Another reason to price your home competitively from the start!

The Twin Cities area has been determined to be a declining market by a major mortgage insurance company.  Major lenders are now instituting new guidelines to reduce their exposure in case of loan defaults.

The past real estate boom was fueled in large part by the ability of many buyers to use low or zero down financing to enter the marketplace and increase demand for housing. While this was a good thing, it is hard to argure that these highly leveraged loans, combined with declining values and rate adjustments on option/arm loan products all contributed to the current mortgage mess.

With these new lending guidelines, the ability of buyers to use this type of financing will be severly hampered if the price of the property is not priced slightly (about 5%) below the appraised value.

Keep this in mind when pricing your home!  Not only do we have to sell your home to the buyer, but to the appraiser and the mortgage comany as well!

Read below for details from US Bank Home Mortgage:

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REVISED USBHM DECLINING MARKETS POLICY

The industry is in considerable turmoil due to declining markets and the impact on Maximum Financing on properties located in those markets. U.S. Bank Home Mortgage Wholesale Division has distributed a memo clarifying their position on the issue. Highlights from the memo:

• If the appraisal indicates the subject property is located in a "Declining Market" or there is an "Oversupply" in the market or the AUS Feedback indicates Declining Values, then the loan will be subject to a 5% reduction if maximum financing is requested.
• Required private mortgage insurance must be provided by one of our three approved primary vendors: MGIC, Radian or RMIC. If required mortgage insurance is unable to be secured at the maximum requested terms, the loan must either be reduced by the required 5% or declined.

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