2022 Boise Idaho Real Estate Blog

Is the Treasure Valley officially a "declining market"?

Main Boise Home Loans

Depending on who you ask, you will get a different answer. You need to understand how Private Mortgage Insurance companies view our area...your LTV on your mortgage depends on it!

Your home may or may not be declining in value depending on who you ask. Your appraiser, local tax assessor, Realtor, and media outlet all seem to have a different take on that subject...and sometimes they are conflicting! Let's try to make sense of it from a mortgage qualification point of view:

ASSUMPTIONS: You are applying for a conventional conforming mortgage with a 97% LTV (loan-to-value). The 97% LTV means that you are attempting to mortgage 97% of your home's value or purchase price. In this scenario, a private mortgage insurance (PMI) policy will need to be taken out because you are financing more than 80% of the value or purchase price. Three different parties to this transaction have the opportunity to label the local housing market as declining in value. They are...

1) Fannie Mae/Freddie Mac -- When a mortgage approval is ran through one of these agency's guidelines, a message in the approval may indicate that the home is in an area where values are declining or difficult to determine.

2) Appraiser -- Your home's appraiser will indicate his/her opinion as to whether property values in the local market are increasing, stable, or declining.

3) Private Mortgage Insurance company -- There are many PMI companies (Radian, Genworth, MGIC, to name a few). These companies maintain their own lists of national housing markets and areas that they consider declining in value.

Although this guide is not 100% full proof, it mostly works this way: If one of the three parties listed above say that the local market is declining, your LTV on this transaction will probably be reduced to 95%. This is done to protect your mortgage lender and PMI company against the fact the future value of your home is probably going to drop.

If this were a purchase, you would be limited to a minimum of a 5% down payment. If this were a refinance, you would only be able to mortgage 95% of your home's value. How do you combat this if a higher LTV is needed:

 -- Apply for a government (FHA/VA) loan where convention PMI is not used
 -- Apply for a piggy-back 2nd mortgage (yes they still exist, although they are much tougher to get)

So, as a mortgage consultant, how have I seen these three parties so far? I have experienced Fannie Mae findings showing different homes in the Treasure Valley to be in declining markets. Not all PMI companies are labeling us as declining yet, but most are. I have not had an appraisal come back yet indicating that we are in a declining market yet.

So, is the Treasure Valley in a declining housing market? Like I said at the top...it just depends on who you ask.

Posted by Eric Leigh at 7/2/2008 3:17:00 PM

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