This information was revealed on questioning a loan officer on which Counties in Maryland were listed as a Declining Market under Fannie Mae and Freddie Mac guidlines. All other areas in Maryland were subject to appraiser approval.
Good luck on your house search.
I made many calls to lenders to find out how they identify a declining market and it was revealed that there are two major factors that they consider when making that determination. I like yourself was daunted by the fact that they required an extra 5% down to secure the better interest rate they they offer up front.
1. Fannie Mae and Freddie Mac produce lists of states and counties that are considered "declining markets" and they will not purchase loans made in those areas if the loans are not structured properly. If your looking at a lender that intends to resell your loan there will be a very good chance that they will require the extra 5% since Fannie Mae and Freddie Mac are where the loan will likely end up.
2. The lender will send out their own appraiser that in addition will do a trend analysis on the prices of homes in that area. If the price is determined to likely decline in that area, zone, district, or subdivision then they will note that for the lender and you will have to bring an additional 5%.
I would call your lender and ask if the home is marked in a declining market first and foremost. They will be able to tell the blanket areas right away. The appraisal will be to catch those areas that are sliding into a declining market.
I do have a list of the counties that were given to me as declining markets when I made those phone calls 3 weeks ago. I don't have them infront of me right now. The list was derived from a direct lender who was interested in reselling the loan and took its declining markets from Fannie Mae and Freddie Mac.
The Eastern Shore (Queen Ann?) and Anne Arundel county were not on that list at the time of my call. The lender said those areas were left to Appraiser approval. I will try to find the list and post later.
I hope this helps not only Steve but others who are looking to buy.
It depends on the lender, I have heard other agents run into problems with this. If you are working with a National Lender they may consider MD a declining market because there ARE some areas in Maryland that are in a decline. Now most of the Annapolis area is not declining as much as some other areas if any at all. I have heard lenders will wait until just a few days before settlement, ( basically when the final underwriter for the bank is reviewing all the documentation) and approve the loan but change the loan requirements. I am not sure of the legality of this, and cannot speak on it as I am not a lawyer, but I know it has happened. My best suggestion to you is if you are using a National lender is to get a "second opinion" from a local Maryland Bank.