Home Buying in Brookland>Question Details

Sk, Home Buyer in District of Columbia

Was told that I need to have additional 5% down!?

Asked by Sk, District of Columbia Thu Apr 17, 2008

I am in a process of buying a house in DC with 10% down. I was told that I need to add another 5% down due to the property is located in soft market area (eventhough it was appraised for the asking value). Is the max LTV ration for DC area 90% with out including the additional 5%? Also, is there a lender who accept a max of 10% with 700 credit score? Please help.

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13
FHA may be the way to go. You don't have to deal with a declining market.
0 votes Thank Flag Link Tue Apr 22, 2008
Thank you all for your feedback. I just spoke with FHA lender today. Hope they will have a good news for me. BTW, I am buying a single family house with a price of $600,000.
0 votes Thank Flag Link Mon Apr 21, 2008
I just heard that this is happening all over. In our area Pierce County Washington State as just been name as a declining market and will also require an additional 5%. If you are going fannie mae or freddie mac.
0 votes Thank Flag Link Sat Apr 19, 2008
With regards to the additional appraisal requirement, this olnly applies to the new "jumbo FHA" loan category. These are loans above $362,500 but less than the new regional loan limit (in DC metro $729,000). If you fall in to that category, you may be required to have two appraisals (and bear the cost of such) but the down payment requirements will not change.
0 votes Thank Flag Link Sat Apr 19, 2008
FHA does address declining markets. Earlier this month they started requiring 2 FHA appraisals on loan amounts (excluding mortgage insurance premium) that will exceed $417,000 and the LTV (excluding MIP) equals or exceed 95% and the property is determined to be in a declining market. Each of the 2 appraisals are to be done by 2 separate FHA approved appraisers. FHA does not require higher down payments in declining markets yet, nor have they established credit score thresholds for declining markets.
You may want to check with your lender about going FHA (if they are approved to do FHA) or contact another lender who is approved.
0 votes Thank Flag Link Sat Apr 19, 2008
Your situation is increasingly common. But this has more to do with the mortgage insurance companies than the Lenders. Any loan with less than 20% down requires mortgage insurance. The companies that provide this insurance have determined that DC is a "declining market" and will not insure any condo with a loan greater than 90% of the purchase price (or appraised value, whichever is lower).

The fix is to apply for an FHA loan, which allows for 97% financing with no consideration of "declining markets." Two caveats: FHA requires specific approval of any condo project, and many Lenders will not accept condos that have not been previously FHA approved. A good broker will have Lenders who will approve these loans on a case-by-case (or "spot") basis.
Web Reference: http://www.LouPatierno.com
0 votes Thank Flag Link Sat Apr 19, 2008
Depending on the loan program and lenders loan to values vary. Fannie Mae and Freddie Mac have certain set guidelines. If it is owner occupied there are still some 100% programs out there but there are still restrictions and requirements to qualify. FHA has no declining market hit on loan to value however there is a limitation on maximum loan amounts.
0 votes Thank Flag Link Fri Apr 18, 2008
Condo buildings need to be FHA approved. Homes are easier to get approved.
0 votes Thank Flag Link Fri Apr 18, 2008
Thank you Jim. I might take you on your offer and contact some local lenders. What about FHA Loan? What are the approval qualifications? I was googling and saw something like you can have a downpayment as low as 3%. It that true?
0 votes Thank Flag Link Fri Apr 18, 2008
I have not heard of this happening; but I so know banks are continually changing policies. It seems if the appraisal came in, that you should be fine. I would interested in what lender you are using? I would be happy to recommend a couple of great loan officers who work in the DC area that may be able to help.

Also; you should be prepared to have to order an another appraisal. Lenders are less and less willing to accept someone else's appraisal.
0 votes Thank Flag Link Thu Apr 17, 2008
Oh, and... typically a "local" lender will be your best best. It is the larger bank conglomerates that are popping up with this 5% increase in down at the last minute...
0 votes Thank Flag Link Thu Apr 17, 2008
I was just talking to a co-worker about this exact situation that happened to their buyer. The reason is this... you negotiated your contract to buy and got your appriasal back. As a result of the appraiser putting within the appraisal "home is located within a declining or soft market area"... your lender has now required an additional 5% down in order to combat the appraisal. The only way around this is to ask your agent for loan/lender references and try obtaining a loan from another lender. Sometimes you can get it through without the additional 5%. In consideration that your credit (all be decent) is not stellar, this could also be playing into why the lender is requiring additional funds down. Check with your agent. If you have a financing contingency built in to the purchase agreement (and it specifies you were obiligated to put 10% down) you should not loose any money if you have to walk. But check in to additional financing options... chances are you should be able to get your loan pushed through with another lender using the SAME appraisal. Good luck to you... thanks for posting!
0 votes Thank Flag Link Thu Apr 17, 2008
You where asked to put an additional 5% down because you are in a soft market area? That makes no sense! You should take your G.F.E. to another lender and ask if they can 1 up your current lender. Good luck!
0 votes Thank Flag Link Thu Apr 17, 2008
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