The Troublesome Debt Difficulty For Home Owners - Has It Gone Too Far?

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The more informed buyers have known for a while, yet lots have been reluctant to read what it says. Many residents of the United States are sinking deeper into debt. Part of this problem likely comes from the expense of owning a house. For a growing group of homeowners, housing debt is forcing a difficult situation into a dangerous one; creating a “foreclosure crisis” that will likely last several more years.

Several months ago, current numbers released by the Department of Housing and Urban Development are showing an alarming upswing in the rate of foreclosures. In some areas, of all property owners who were extended sub-prime loans, the foreclosure rate is as high as 14-20% when 4-6% is considered “healthy”.

The results have been all over the news — the financial market has been in upheaval. Sub-prime lenders traditionally specialize in extending financing to borrowers with credit problems, unable to verify income, employment or other factors that make them a poor fit for traditional financing. In the last year, many major companies in the sub-prime market have sold off operations or in some cases simply closed their doors and gone out of business. Just as their borrowers were unable to afford the escalating expenses of homeownership, many sub-prime lenders found it impossible to absorb the foreclosure rate we are now seeing.

The major issue doesn’t stop with the sub-prime market. Even traditional lending institutions are tightening purse strings and placing more scrutiny on the loan approval process. This makes us wonder: how did this problem with foreclosures ever begin in the first place?

A fair amount of the responsibility can be laid at the feet of the borrowers themselves. In this age of “bigger is better” many Americans see a big home as an indicator of success. This pushes many buyers into trying to own a bigger, more expensive home without enough thought to being able to afford one. Often buyers push how much they can afford and end up in a difficult situation or worse.

Blame can also be laid at the feet of some financial institutions. Who is better qualified to know how much debt a borrower can afford? The current debt-to-income ratios are either not working, or the types of loans that lenders are offering are poor choices. Loans like 28/2 and 27/3 loans with fixed teaser rates that adjust after 2 or 3 years with a balloon or margin are just a few of the loans that have caused borrowers to get into trouble.

Of course the resolution of all of this will be better qualified and better educated borrowers but did things really have to go so far? We've seen foreclosre problems hit most of the large regions we work including Oswego real estate, Batavia real estate, Aurora real estate, Plano real estate, Montgomery real estate and Yorkville real estate. Frankly, I sometimes think they did. Lately it seems like it takes a good deal of shock to get some things back on track. In the mean time, if you are thinking of buying a home in the next few years, it’s important that you start talking with your local REALTOR or financial professional and make sure your finances and credit scores are in order before you go forward with applying for a loan.

Article Source: http://depositarticles.com/

Eric Rogers is a real estate professional with Century 21 Pro-Team in Northern Illinois and a local professional for Stonebridge Subdivision and Oakhurst Aurora

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