ELKHART -- Like home buyers across the country, residents in Elkhart County will have to purchase homes the way their parents did.
With lenders tightening loan requirements and mortgage insurers writing stricter guidelines, the days of no money down are over and home buyers are having to make a down payment, just like mom and dad.
"We're getting back to the way it was," said Tom Canarecci, managing broker for Coldwell Banker Anchor Real Estate in Elkhart. He explained that those shopping for a home may have to wait to buy while they save for the down payment.
The Midwest did not experience the wild swings in housing prices of states like California, Arizona and Florida but of the three major mortgage insurers, one -- AIG United Guaranty -- is listing Elkhart County as a declining market. The other two, MGIC and Genworth Mortgage Insurance, did not put any Indiana community on its declining market lists published during the first quarter of 2008.
In the fourth quarter of 2007, AIG listed Elkhart-Goshen, Fort Wayne, Kokomo, Lafayette and Terre Haute as declining markets.
A declining market means home values are staying steady or decreasing, said Mary Dunbar of Dunbar Mortgage Associates in South Bend. Other factors that cause mortgage insurers to label an area as a declining market, according to Alan Thornup, executive director of the Indiana Mortgage Bankers Association, are job losses, high percentage of FHA and VA loans, high use of down-payment assistance, mortgage fraud and predatory lending.
Typically, mortgage insurers who rank a city or state as a declining market will only insure 95 percent of the mortgage so home buyers in that area have to make a down payment of at least 5 percent.
Some mortgage insurers, however, are preparing to restrict standards regardless of whether a particular market is declining. MGIC will no longer insure mortgages with 100 percent or 103 percent financing come March 31, said Katie Monfre, spokeswoman. Buyers in declining markets will have to pay 5 percent of the home's cost and in a non-declining market, the company will insure only 97 percent of the mortgage so buyers will have to make a down payment of 3 percent.
"When I started in this business, those were the guidelines," Dunbar said. "We're just going back to more sensible underwriting guidelines."
At First Horizon Home Loans, Don Reber tells home buyers they will have to put 3 percent down and will have to meet rising credit criteria to buy a house. However, since only one mortgage insurer considers Elkhart County a declining market, Reber said he probably would not mention AIG's listing to the buyers and just use one of the other mortgage insurers with a more favorable view of the area.
Some parts of the county, such as Bristol, Middlebury and sections of Elkhart, are seeing house values appreciate at the normal 3 percent rate, Reber said.
The stricter underwriting standards will keep some people out of the market, Canarecci said. Still, he does not think requiring a down payment will prevent many from becoming homeowners.
"People are probably going to have to buy a little less expensive home," he said, "but because they put money down they are going to have equity in it right away."