Sting, I highly doubt you can appeal their decision to require you to put 5% down. In light on the current housing situation, requiring a down payment is prudent on the bank's part.

The declining markets approach being utilized by some banks is fairly consistent. Alameda/Contra Costa are being hit hard, whereas SF, Marin, San Mateo have not yet (too bad).

I think the only reason you are being allowed to put 5% down instead of 10% is due to the fact you are dealing with a conforming loan under $417k.

Good luck.

And is there any different downpayment requirement if I look at elsewhere like Emeryville or South San Francisco? I thought lenders are pretty loose on 1st time homebuyers, but looks like it's not.

Dear ALL,

I have a question. I am currently placing an offer on a short sale condo/townhouse in Daly City which cost only $319K (I offered $310K.) Wachovia & GMAC pre approved me & my gf for 100% financing but since Wachovia considered Daly City a declining market plus the listing has been on the market for a year almost, they ask me for 5% down. I wonder if GMAC will require the same downpayment while underwriting my final approval. Do you think I can appeal their decision saying that it's just listed as 2 in your soft market chart vs other counties listed as 4?

David, I like your style. You sound like one of the few active lookers who actually fully understand what is going on. If you are flexible and patient in this downward market, you can definitely get a great deal. I think by the end of 08 most homeowners (esp in many parts of Oakland) will realize their big assets are losing "value" by the day.

PS. That also means I'm looking in Oakland and San Leandro. SL is ok, little too burby for my tastes, but it's relatively safe and convenient to both SF and the Peninsula (and the South Bay), where my work often takes me.

I'm actively looking in the East Bay. Generally, I'm looking for a 3 BR house where my payments would "make sense" relative to renting.

It's not a measure of how much I can pay--I sold my house in Chicago for just under $600,000 and moved back here, so I have plenty of money for a down payment (I had an "old fashioned mortgage" with a down payment). But I refuse to overpay for an asset, be it a stock, bond or real estate.

Since rent is so much cheaper here than my old neighborhood in Chicago (yes really), that means I'm looking for a house in the $400-$450K range, maybe a little higher if it's justifiable (view, big lot, good schools). For now that means a lot of bank-owned properties as "real human;)" sellers haven't generally moved to the "acceptance" phase of the fact that their house is not worth whatever they dreamed it was in 2005.

But that'll come. So I'm not rushing out there, and if I don't get a bank (or person) to "hit my bid," I just wait a week and voila' there's another REO house or distressed seller's house to look at.

Those are my thoughts.

The Stim package just passed as you may know now, and it did include the conforming loan increase to $729,750.

While I believe this doesn't do much in the way of stimulation and helping the homeowners who need help (and I don't advocate that anyway) - there is talk now that Fannie/Freddie are under pressure to ease their guidelines to allow more to actually qualify for their programs. That would be another huge mistake, but at least personally, help many of my friends who are looking to refi or purchase before end of 08.

Thanks D.G. and David. Good to know.

Any thoughts on my third question above? Although perhaps that can't be answered until the Stim package is actually passed and banks have assessed the impact.

Pop,

I did confirm with Chase that the terms are still the same still even in the declining markets - just the add'l 5% down requirement. Wonder if that will last...

Thanks, David..

Can I assume then that you are actively looking to buy in the east bay? What is your thought process, and what are you looking for - if I may ask?

I can confirm conforming loans are still 35% DTI, and they allow 10% down in the East Bay, assuming my pre-approval letter is still valid from a week or two ago.

Pop,

Thanks for thanking the readers and contributing.

Chase guoted me the following minimum requirements about 3 weeks ago, but this was for San Francisco:

700 FICO
10% down
up to 45% DTI ratio for stated
uo to 50% DTI ratio for full doc

Conforming loans have always allowed up to a 35% DTI from what I have read and I don't believe that has changed at all.

First, a quick thank you to fellow readers for such intelligent commentary. It's a pleasure to read well-reasoned, non-inflammatory "comment" strings, which can add as much knowledge as the original post.

Second, wanted to review what it takes to get a non-conforming loan in "risky" zipcodes: credit score of XXX or higher (debatable, but 720?), 20% down, and proof of income demonstrating mortgage payment will not be more than 30% of monthly income. Did I miss anything? So, way fewer buyers can qualify - perhaps how it should have been all along.

Third, to reduce foreclosure rate, what are banks doing either of their own volition or as pushed by the Stimulus package should it pass? Are they actually offering to hold to the low teaser rate and let borrowers (who now wouldn't qualify) off the hook with no other penalty? Could get a firm answer from reading media coverage of Stim package.

Adam- thanks for the lınk.

I saw the zıp code reference here ın the Kenneth Harney column I lınked to:

Other national lenders have distributed their own proprietary "declining markets" lists. GMAC-ResCap of Minneapolis even has a Web site allowing loan officers to type in a ZIP code and instantaneously learn whether the company ranks the area a D, C or lower risk. Although the public is not supposed to see the site, one mortgage company executive provided me with an access link.

And Red.. I completely agree wıth your statement IF the slowdown/recessıon hıts hard globally. If Asıa hangs ın there and theır currencıes stay strong agaınst the dollar expect them to buy Bay Area propertıes on the cheap.

Marin, San Francisco and San Mateo can certainly expect to join the declining markets soon. The price slope will simply become too great; If I can save $100k on buying a home by just driving 10 minutes further, then I would. San Francisco will probably be the last to really slip, since it is nearly an island and it is a big jump over the bridges, but as the Berkeley and Oakland hills get cheap even SF will succumb. Once the global economy starts slipping, even the foreign investors will not save SF home prices.
You can expect banks to charge a real premium everywhere for anything less than 20% down.

It won't prevent people from buying because...prices will drop! :)

re. 20% down in rockridge--it was for a conforming loan. i don't think the neighborhood is really a declining market, but the lender was looking at it city-wide vs. zip-code-wide. i don't know, it doesn't make sense. i was just told that the only place to put 15% rather than 20% down in alameda county was any zip starting with 947___, which is every zip in berkeley. but perhaps wells fargo is just more cautious than other lenders. if it's the new trend, it's going to prevent a lot of people from buying in certain neighborhoods in oakland, regardless of what happens w/the conforming loan limits.

JPMorgan Chase is following this trend as well, although right now the only Bay Area counties considered NON-declining for us are Marin, San Francisco, and San Mateo (we can still lend up to 90%). Every other county requires the minimum 15% down.

So far we're not sorting by zip codes.

- Lee Achacoso, Senior Mortgage Banker, JPMorgan Chase

David,

We haven't heard anything about zip code specific rankings by Countrywide, but if you're interested we did publish the link to their complete list of "Soft Market" counties two weeks ago:

San Francisco Currently A "Category Two" Soft Market To Countrywide

Rockridge has seen a few foreclosures, and the new "mark to market" probably spooked the lenders.

That's good for me. I'll put 20% down when prices drop another 20%.

OMG, jez, Rockridge! I am shocked! I think of Rockridge as upscale. Sounds like you, David, are surprised as well.

I own my house in Richmond and would love to move to El Cerrito, Albany or Berkeley, well, anywhere nice. I bought in Richmond as a way of getting a foot in the door. ;-)

Anna,
I think it will likely be by city or county as well, but the article I referenced did mention zip codes so I threw that in there. But based on numbers we have seen in certain districts of SF (namely district 10) versus others that have held up well so far, I guess you could make an argument for it by zip code.

Janis,
Yes, unfortunately I think this could have a negative effect for you. As someone who offers unsolicited advice often, I would try to sell as quickly as possible if I were you, or rent it if you can, or be prepared to hold onto to it for many many years. Where in the east bay do you live now, and where are you thinking of moving to? I am eying the Oakland/Berkeley area myself to be my next home, likely in 2009-2010 as of now.

Jez,
Now that is very interesting. I would have guessed 94618 has held up okay thus far but apparently not. Was this for a conforming or jumbo loan?

it's true. today wells fargo told me that oakland's rockridge nabe (zip 94618) was a declining market and requires 20% down no matter what--though berkeley (any zip in berkeley, even what i would consider more risky areas) only require 15%.

Oh no! That's bad news for me and my tentative plan to try to sell my house as quickly as possible so I don't lose all the appreciation and buy in a bettah 'hood - but still in the East Bay. I have great credit, but I guess that doesn't count, eh?

David, if the loans are determined by zip code, do you think that loans for certain parts of the city could be treated differently than others (as insurance already is)? Or do you think it's apt to be more by city/county?