Underwriting guideline changes have had a major affect on new developments in Cook County. When there aren’t enough pre-sales in a particular project, some lenders require that the buyer puts down an additional 5%. This is because Fannie Mae considers some areas of Cook County “declining markets”.

Essentially, homes values have been reduced through foreclosures or drastic underbidding from list price and are expected to decrease further in the future. For this reason, lenders are not willing to take on the same risk and lower their loan-to-value ratio. For instance, if the maximum allowable financing was 100% for a certain product, it would be reduced to 95%.

While PERL Mortgage continues to have options to overcome these issues, the lending market is in constant flux. Guidelines change every day and without a crystal ball, it’s hard to know what to expect.

What can you do to ensure your success as a buyer?

Maximize your investment. When you buy a home, considers the needs of future buyers as well as your own. Don’t just shop by price, shop for potential.

Size: In this market, it’s better to get a smaller home in a nicer area than a larger home in a challenged location. While you can find a great deal on larger homes near loud trains or congested intersections, they will not have the same potential for growth in value and will be tougher to sell in the future.

School system: When you’re buying a home with multiple bedrooms, there’s a good chance you or your future buyer is planning for a family. Research the public school system and find the most desirable school districts.

Improvement: Buy a home with room for improvement. You will save money by making upgrades yourself and also increase your home’s value immediately. Choose finishes that are modern but timeless. You can also use the opportunity to explore green options; some even qualify for income tax deductions.

Transportation: Find a home that is close to public transportation or near key expressways, depending on where you live. This will widen your pool of buyers when it comes time to sell.

Noise: While living near bars and restaurants is convenient, living too close can be disruptive especially during warm weather. Choose a location that is in close proximity to nightlife but not within earshot.

Amenities: Buyers aren’t just looking for a home. They are looking for an lifestyle. Select a neighborhood with a nearby grocery store, dry cleaners, coffee shop and other everyday amenities. Parks are also a great plus for buyers with kids and/or dogs.

© 2008 PERL Mortgage Inc.

Related Articles: Buyers, Cook County, Declining Market, Fannie Mae, Green, Income Tax Deductions