Home Loan: Navigating The Mortgage Crisis
In the past house prices took off, banks gladly gave home loans to everyone including people with bad credit, because home equity made up for the risk. To everyone it seemed like home prices were going to continue to rise, so the banks continued to loan money and make commissions on those loans. As the real estate business continued to grow, houses continued to be built.
Unfortunately, they built too many in too short a period of time. What followed was this mortgage crisis which everyone is talking about, and which we are still affected by. Since there was an excess of houses on the market, prices began decreasing again. At times, some people had a mortgage loan that was greater than the value of their house.
During the boom times, people with bad credit got loans, but those loans usually carried very high rates of interest. At times rates began low, but then they grew higher as the years went on. Since the home loan was more than the house was worth, it was not possible for people to sell, and then, since payments were going up, they often got stuck with homes they couldn’t even afford.
People started to fall behind on their loans, which caused their homes to enter foreclosure, where they eventually ended up back in the hands of the bank holding the mortgage. This caused the number of houses on the market to go up dramatically, forcing the prices downward, creating the cycle that we are still suffering from today.
It is becoming more and more difficult for people with poor credit to get a home loan. In the aftermath of the mortgage meltdown, lenders have become much more rigid about who they will give loans. Even those with good credit are noticing that it is harder to obtain a loan, or to obtain one with good rates. Through the time period when home prices were on the rise, many mortgages were made available with little or no down payment. This practice made it simple for people to get loans when they didn’t have much to put down, but that is no longer the case.
It is still possible for someone with bad credit to get a loan, but it will probably require a much bigger down payment. In some cases a bank may require twenty five or thirty percent of the price of the home in order to grant a loan. You can shop around and compare mortgage lenders to find out who will give you the best loan with the best terms.
Over the last few years as housing prices were getting higher and higher, banks became more willing to supply a home loan to people, even those with bad credit. What followed was the “mortgage crisis” that we’re still feeling the effects of. Because there were too many houses on the market, prices started to go back down. Sometimes people had a mortgage loan that was more than their house was worth. It is not uncommon for banks to require twenty five to thirty percent of the home’s price as a prerequisite. To get the best loan with the best terms, shop around and compare mortgage lenders.
- Jonathan Drake
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