So you've been told by a lender that the market you're buying in is a declining market—but what exactly is a declining market? And how will it affect your mortgage?
Declining markets - defined.
Surprisingly, there is no standard definition of a declining market. This means that while one lender may consider a city a declining market, another may not. In simple terms, an area is flagged as a declining market when the value of the housing market is reduced by conditions such as lower comparable sales and listings, short sales and foreclosures. Lenders deem these areas both risky and problematic because of their falling prices and higher rates of default.
Who decides what markets are declining?
In most cases, it is the job of the appraiser to define what constitutes a declining market. Then it is up to the lender to determine if the home's appraisal accurately reflects market conditions. The lender will then let the borrower know if the home they are looking to purchase is in a declining market.
What are the consequences of moving to a declining market?
The most immediate consequence of purchasing a home in a declining market is that you'll need an additional 5% down (on top of your existing down payment). So, if you're planning on putting 10% down, but are buying in a declining market, you will need to come with 15%.
To find out if the are you're moving to is considered a declining market—contact Physician Relo today.
