extreme home makeover Article

The Growing Financial Difficulty For Home Owners - Has It Gone Too Far?
By Eric Rogers
The writing has been on the wall for some time, yet lots have been reluctant to read what it says. Many home owners are finding themselves getting deeper into debt. Part of this problem likely comes from the cost of owning a home of thier own. For a increasing number of homeowners, the cost of home ownership is forcing a tough situation into an impossible one; creating a “foreclosure crisis” that will likely last many years more.

Several months ago, current figures released by the Government are showing an alarming increase in the rate of foreclosures. In some areas, of all property owners 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 stock 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 traditional financing. In the past few months, many major players 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 clients 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 problem doesn’t stop with the sub-prime market. Even traditional banks are tightening purse strings and placing more scrutiny on the loan approval process. This makes us wonder: how did this issue ever happen in the first place?

A good deal of blame can be laid at the feet of the borrowers themselves. In this age of “big is best“ many Americans see a big home as an indicator of success. This pushes many buyers into trying to own a larger, more expensive home without enough thought to the financial burden of owning one. Often buyers push the levels of affordability 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 being ignored,

or the types of loans that lenders are providing are not good 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, Geneva real estate, St. Charles real estate, Plano 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 to go right. 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 loan officer and make sure your finances and credit scores are in order before you continue with applying for a loan.

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Eric Rogers is an award winning agent with Century 21 Pro-Team in the Chicagoland area and a local professional for www.yorkvillerealestate-il.com“>Yorkville Real Estate and www.bataviarealestate-il.com“>Batavia Real Estate