Who ever said that bankers weren’t creative? According to the finance officer I spoke with today, “declining,” “distressed,” and “severe” are all part of banking terminology used to describe the housing market. Wells Fargo deems the current state of affairs in California to be a “declining market.”

What does that mean? It means that my house in Joshua Tree is now worth $20,000 less than what I bought it for two years ago and if I want to refinance that the bank will ask for 5% more down payment than it would in non-declining times. Which means, yes, the interest rates have dropped – but the banks are scared to loan you money so loaning guidelines have become extremely rigorous.

I originally got my house in Joshua Tree as a first-time home buyer teaching at a under-performing school and so I was able to get an amazing 30 fixed at 5.125%.

Now that it’s rented out to a tenant and somehow my financing agency has gotten wind of this, I am no longer qualified for the loan and must pay the loan in full. Unfortunately, I now have to come up with 25% of the current value of the house to borrow a maximum of 75%, which is about $25,000 short of what I need to cover the loan.  And this is after I put 20% down two years ago!

This is why I spent the better part of an hour talking earnestly with a finance officer this afternoon. His advice: re-occupy my JT house, show proof of my occupancy to my loaning agency, and continue with my present loan.

My second option is to re-finance the JT house as my second home: that would allow me to get away with only coming up with 10% down.

A non-owner occupied home is the most difficult one to finance. It would require 20% down (25% right now because of the declining market). Yikes!

Boy, they really know how to stick to the man. Tell me again, why did I think becoming a landlord was a good idea?