The mortgage industry and banks in particular are reeling as a result of their inability to sell home loans they originated to investors. The concern centers on current economic conditions and declining property values in many markets. Consequently, the Federal National Mortgage Association (FNMA) has instituted specific guidelines to reduce credit and collateral risk to lenders.  

The term “Declining Market” is determined by appraisers and utilizes various data sources including national and local information. If a home is determined to be in a declining market, the maximum home loan amount that can be borrowed is reduced by 5% of the revised appraised value of the home. This simply means that a buyer must increase their mortgage down payment by 5%. The declining market rules are rather subjective, which means that declining markets can be defined within a city or suburb, or even a neighborhood.  

Both home sellers and home buyers should be aware of the ramifications of the declining market adjustment before an offer is made and accepted. An experienced mortgage lender familiar with the declining market underwriting process is essential for a home buyer before an offer is made. 

If your ability to purchase a home with a conventional loan is adversely affected by these changing conditions, NextHome Mortgage has a variety of home loans that can reduce the amount of money required as a down payment. Start your search by visiting our Mortgage Home Loan page.