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The Troublesome Home Ownership Problem for Property Owners - Is It Out of Hand?

By: EricRogers

The writing has been on the wall for some time, yet a few have been reluctant 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 house. For a rising segment of homeowners, housing debt is forcing a tough situation into an impossible 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 increase in the rate of foreclosures. In some areas, of all property owners who were extended sub-prime financing, the foreclosure rate is as high as 14-20% when 4-6% is considered “healthy”.

This data has 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, 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 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 costs of living, many sub-prime financial companies found it impossible to absorb the foreclosure rate we are now seeing.

The backlash doesn’t stop with the sub-prime market. Even traditional lenders are tightening purse strings and placing more scrutiny on the loan approval process. This makes us wonder: how did this mess ever happen in the first place?

A fair amount of the responsibility can be laid at the feet of the homeowners themselves. In this age of "housing glut" many Americans see a big home as an indicator of success. This pushes many buyers into trying to buy 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 laid at the feet of some financial institutions. Who is better informed as to how much house debt a borrower can afford? The current debt-to-income ratios are either not working, or the types of loans that lenders are selling 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 end result of this mess 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, Plano real estate, Geneva real estate, Batavia real estate, Aurora real estate and Yorkville real estate. Frankly, I sometimes think they did. Lately it seems like it takes a big shock to get some things back on track. In the mean time, if you are thinking of purchasing real estate in the next few years, it’s important that you start talking with your local REALTOR or loan officer and make sure your finances and credit scores are in order before you continue with applying for a loan.

Article Source: http://www.article-exposure.com

Eric Rogers is a full-time agent with Century 21 Pro-Team in the Western Suburbs of Chicago and a local expert on Golden Oaks Subdivision and Oakhurst Subdivision

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