Foreclosure Crisis

Foreclosure Crisis

September 6, 2007

I was watching the nightly news tonight, something I rarely do since my tv never changes from the Nickelodean/Cartoon Network, and a story was on named the 'Foreclosure Crisis'.

Granted the media usually makes the real estate market seem much worse than it is, this is actually a true crisis that is happening within our present day market.

The first thing to do to correct this is to find what caused it. The main reasons: loose lending requirements and adjustable rate mortgages. Combine these two together with a borrower who only lives for the moment and you've got trouble just waiting to happen.

An adjustable rate mortage will have a 'teaser' rate to begin with, typically for 1 or 3 years. This teaser rate, 3 years ago, was much, much lower than the normal 30 year fixed rate mortgage. And the lending requirements....bad credit, no credit, no downpayment....some of these lenders were just letting it all fly out. Recently, a lot of lenders have gone belly up. 3 years ago it was still a seller's market, and some people were paying over inflated prices for their homes. That is part of the reason why they can't just refinance now...the property isn't worth what they paid for it!

So what can a new borrower do to make sure they

don't fall victim to the mortgage crisis? Have a nice amount saved up for a downpayment, that way you'll have wiggle room should the market decline. Also plan for the long run. Go with a fixed rate mortgage so you know your payments won't increase. You'll also need to keep your credit score up. Lenders are becoming much stricter in their lending practices.

Remember, right now it is a BUYER'S market. With historically low interest rates and alot of inventory to chose from, right now is a great time for a well qualified buyer to buy!