The Fannie Flex mortgages (over 95% LTV) will more than likely go away, and probably very soon. The hard thing about them is the mortgage insurance- while Fannie may give an approval for it, it's the mortgage insurance (MI) that's getting tough to find as most MI companies are raising the requirements to eliminate 98% of applicants (i.e., United Guaranty requires like a 740 or 760 middle credit score for anything over 90%). Both Fannie and Freddie's 100% programs were dropped earlier this year because of this. That's why FHA has become so popular. However, what is good about the FHA is the lower monthly mortgage insurance, so payment wise, you're better off.
The declining markets thing is a little different. If you are in an area that is a Fannie Mae/Freddie Mac designated declining market, the amount you can borrow will be lowered by a minimum of 5%. And even if your property is not in a designated area and the appraiser notes anything on the appraisal that indicates a weaker market- marketing time over 6 months, over supply of homes on the market, etc.- they'll knock it down by 5%, too. On an FHA loan, because the government guarantees 25% of the loan amount, declining markets are not really an issue.
While there is an up front mortgage insurance premium charge of 1.5%, it is financed into the loan- meaning that on a $100K purchase price, the loan amount is raised by $1500 in order to cover the charge. This is a lower up front charge than a VA or Rural Development loan (3%+ and 2% respectively). However, FHA also charges a 0.50% yearly mortgage insurance premium charge on the outstanding principal amount which is collected monthly in your total payment, where the other programs do not have a monthly mortgage insurance premium charged- once you've paid the up front fee, you're done. So, if you hold onto that FHA loan for the whole 30 years, you wind up paying 6-9% in mortgage insurance premiums over the life of the loan. You will pay the monthly MI to FHA until you have reached that magic 75% LTV. Lastly, unlike the other two government programs, if you sell or refinance in the first three years, you will get a partial refund of the mortgage insurance premiums you've paid.
I hope this makes sense- there are no such things as nut shells in our industry.
