Oct 02 2008
Depreciating market?
Lenders are looking at communities and geographic areas to determine "depreciating markets." If you are buing in a depreciating market, the lender may be extremely cautious or refuse to loan on the property based on the loan-to-value ratio. Here's the catch-22: If it takes 30 to 45 days to get approval for a loan, your escrow period will be approx. 15 to 30 days more. Over a 60-day period it is possible your purchase in a depreciating market may depreciate below the contract sales price. Your lender may want to renegotiate the terms–the loan amount or sales price–before funding.
Having flexibility in your cash down is wise…and one way to offset this type of situation. More cash down drops the loan-to-value ratio. Alternately, proceed as far toward the approval process and get a fixed figure not to exceed in mind. If you can get approved for a $600K purchase, find a home under $600K to allow some wiggle-room.
