The Worrysome Financial Issue For Americans - Is It Out Of Hand?

The writing has been on the wall for a good while, yet some have been hesitant to read what it says. Many home owners are finding themselves getting deeper into debt. Part of this debt likely comes from the expense of owning a home. For a increasing number of homeowners, housing debt is forcing a difficult situation into a dangerous one; creating a “foreclosure crisis” that will likely last many years more.

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

This information has been all over the news — the stock market has been in upheaval. Sub-prime lenders are usually experienced in extending financing to borrowers with credit issues, 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 sought additional investors 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 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 problem with foreclosures ever happen in the first place?

A good deal of blame can be laid at the feet of the homeowners themselves. In this age of "big is best" many Americans see a large 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 the levels of affordability and end up in a “house-poor” situation or worse.

Blame can also be attributed to 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 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 created difficulties for home owners.

Of course the ultimate result 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, Aurora real estate, Plano real estate, Batavia real estate and Yorkville real estate. Frankly, I sometimes think they did. Lately it seems like it takes a relatively large 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 speaking with your local REALTOR or financial professional and make sure your finances and credit scores are in order before you continue with applying for a loan.

Article Source: http://www.articlemonk.com

Eric Rogers is a successful real estate agent with Century 21 Pro-Team in the Chicagoland area and a local real estate agent for Stonebridge Subdivision and Oakhurst Aurora

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