Henry, Other/Just Looking in Los Angeles, CA

Could someone please explain a soft market...?

Asked by Henry, Los Angeles, CA Mon Jan 14, 2008

and how that affects getting a loan?!?!?!?

We were told that we could put 5% down but I just got a phone call to say they may have to change the type of loan I get because of the soft market.

Help the community by answering this question:


I dont think a soft market is the correct term your lender should be using in that specific case. If you are trying to get a loan with 5% down in a declining market such as parts of southern California, inland empire and places were values are declining. Some banks will ask you for the zipcode and they have specific area's were they consider the market declining. What they usually do in this case is cut the value by 5% so instead of 95% financing they consider it 100%.

Thats the quickest way to answer it without going into to much detail.
2 votes Thank Flag Link Mon Jan 14, 2008
The market is definitiley "Soft"......to put it mildly. Most lenders are requiring an additional 5% down in areas identified as Declining Markets (most areas in California are). There are a couple of exceptions...but any day now those banks will probably follow suit (if they haven't already...as we are speaking). For more informaiton please call me at 818-481-8555 Mike Stone
1 vote Thank Flag Link Fri Feb 15, 2008
To sell your home you need a ready, willing and able buyer. Lets see what this means.

They must be ready to buy a home - some buyers are waiting for prices to fall further.
They must be willing to buy your house - this is as intangible how one picks one's mate.
They must be able - They must have the money or be able to get it.

Mortgage companies have lowered interest rates but raised requirements so there are fewer able buyers. This means there are fewer buyers looking than homes which are for sale. That makes it a soft market.

At my company we can get buyers with less than perfect credit 105% financing even in this market. This makes buyers more able to buy your home. Further we attract more buyers as we rebate 20% of our buyer's agent commission to them for closing costs.

Next of course the buyers must be able to find your home on the market. Our 201 step markeitng program and the 93 different venues in which we advertise your property makes your home stand out from the clutter. Plus we provide a risk free guarantee. Done't like what we are doing? Fire Us.

Please call me at 323.230.9775 to discuss your situation or email me at maya@fundsavailable.com

Maya Swamy, Broker, List! Buy! Save
0 votes Thank Flag Link Fri Feb 15, 2008
Henry -

I thought you might be interested in this blog post from the real estate section of the Mercury News here in San Jose. It talks about how lenders are "grading" areas and changing loan to value ratios frequently.


One of the best examples I have seen on how to explain "soft market' and underwriting changes.

Good luck,
0 votes Thank Flag Link Sun Feb 3, 2008
Henry, a soft market means properties are not selling as well as they were during a boom. At this point we are into a year, year and a half in the down real-estate market. Los Angeles county is just catching up. Median has dropped almost 15% in the Los Angeles County. A typical downward cycle takes about 6 years, it is just beginning. Prices in LA have dropped in some places between 10-25% and there is more to come. After a ridiculous home appreciation phase, it is time for the prices to settle down. Real estate brokers may tell you otherwise, but their job is to sell houses, if they don't sell they are out of commission. My suggestion to you is to wait for at least another year before seriously considering buying anything in Los Angeles. Meanwhile rent. As an example if you buy a 500K property, 10 percent drop is equal to 50K drop in value of your home, 20 percent drop is a 100K. At 2 K a month you can rent for 2 years at a cost of 48K. With a house you might have maintenance costs plus your utilities will be significantly higher. In the end do the math, but make no mistake about it, this market is going down.
0 votes Thank Flag Link Mon Jan 21, 2008
Henry, in regards to your loan, the banks are coming back with a 5% reduction on their appraisal of the property. They are anticipating further market drops. They want to be ahead of the drop so they can sell your loan to the next investor group. For your benefit, see if the lender has a 40 or 50 year loan to offer you, and make sure you do not get a pre-payment penalty. Did it help? I have seen just about every loan and real estate situation if you want me to help you with yours. Norma 323 550 1200
0 votes Thank Flag Link Mon Jan 14, 2008
Hi Henry,

It sounds like you are referring to a conversation with your lender. By "soft market" they may mean that because many borrowers are defaulting on their mortgages they lender would like to see a larger down payment.

Depending on your credit score and other financial liabilities a bank may only have you qualify for certain loan programs, some of which have different down payment requirements than others.
0 votes Thank Flag Link Mon Jan 14, 2008
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