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Several months ago, current data released by the Government are showing an alarming upswing in the rate of foreclosures. In some areas, of all homeowners who were extended sub-prime loans, the rate of default is as high as 14-20% when 4-6% is considered “healthy”. The results have been all over the news — the sub-prime market has been in upheaval. Sub-prime loan officers traditionally specialize in extending financing to borrowers with credit problems, unable to verify income, job status or other factors that make them a poor fit for conventional loans. 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 clients were unable to afford the escalating costs of living, many sub-prime lenders found it impossible to absorb the rate of default we are now seeing. The major issue doesn’t stop with the sub-prime market. Even traditional lenders are increasing requirements and placing more scrutiny on the loan approval process. This begs the questions of how did this issue ever happen in the first place? A good portion of the resons can be laid at the feet of the borrowers themselves. In this age of "housing glut" many home owners in America 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 the affordability of one. Often buyers push how much they can afford and end up in a “house-poor” situation or worse. Blame can also be laid at the feet of some financial institutions. Who is better qualified to know how much home a borrower can afford? The current debt-to-income ratios are either not working, or the types of loans that lenders are providing 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 home owners but did things really have to go so far? We've seen foreclosre problems hit most of the large regions we work including Naperville real estate, Montgomery real estate, Oswego real estate, Geneva real estate, Aurora 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://www.articlewheel.com
Eric Rogers is a real estate professional with Century 21 Pro-Team in the Western Suburbs of Chicago and a local real estate agent for Stonebridge Subdivision and Oakhurst Aurora
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