Unfortunately, you've overlooked one vital detail and as a result of this oversight, your refinancing plans have been shot down.

In case you haven't noticed,real estate values are dropping. This can be distressing under normal circumstances, but if you're considering refinancing it can be especially frustrating.

You face special challenges during difficult economic times if your area has been flagged by lenders as being in a "declining market". There is hope, however. Here's what you can do.

A critical part of every mortgage or refinance application is an analysis by your lender of your property's fair market value. In order to make this decision your lender will usually require a property appraisal. One little check box can be the difference between an approval and a rejection when refinancing.

Your appraiser is required to check a box indicating whether the market is rising or falling.

A rising market means that property values are appreciating. This means that your property's value is likely to increase after the appraisal has been done, so in the event that you don't make your payments your lender is less likely to lose money if you default on your loan.

However, if the real estate market is in a state of decline, your lender is going to be much more cautious before giving your loan application a "yes", even if your credit is good.

The reason for this is simple. If the value of your property falls after you've been approved and you subsequently default on your mortgage loan, your lender might be faced with foreclosing on a property that is worth less than what is owed.

Mortgage insurance helps protect your lender in the event that you default; however, that insurance policy will only cover the loan up to your property's value.

If an appraisal shows your property is in a declining market, your lender is likely to assume your property will continue losing value.

So they'll take a defensive stance by reducing (usually about 5%) the amount they're willing to loan on the property. This will usually result in your needing to pony up some cash at closing if you're going to get the loan that you need.

A strategy you can try is simple negotiation. You can ask your lender to accept a higher rate of interest in exchange for the lender paying any closing costs you might otherwise be required to pay. Will it work? I don't know. Nothings guaranteed, but one thing is certain: You won't know for sure if you don't ask.

It's kind of like asking a particularly alluring member of the opposite sex out on a date. You might think you don't stand a chance, but if you don't pick up the phone and make the call, you'll never know.

If your lender doesn't nibble at the bait you really have one choice: Take a wait and see approach. Hopefully property values will reverse course and begin going up again. When they do, you'll be ready.