The majority of financial professionals have known for a good while, yet some have been refusing to read what it says. Many home owners are finding themselves getting deeper into debt. Part of this problem likely comes from the expense of owning a home of thier own. For a growing group of homeowners, housing debt is forcing a difficult situation into a dangerous one; creating a ?foreclosure crisis? that will likely last many years more.



Earlier this year, current numbers released by the Government are showing an alarming upswing in the rate of foreclosures. In some areas, of all home owners who were extended sub-prime loans, the foreclosure rate is as high as 14-20% when 4-6% is considered ?healthy?.

This information has been all over the news ? the sub-prime market has been in upheaval. Sub-prime loan officers 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 conventional loans. In the past few months, 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 financial companies found it impossible to absorb the rate of default we are now seeing.

The backlash doesn't stop with the sub-prime market. Even traditional lenders are increasing requirements and placing more scrutiny on the loan approval process. This makes us wonder: how did this mess 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 purchase a larger, more expensive home without enough thought to the affordability of one. Often buyers push how much they can afford and end up in a difficult situation or worse.

Blame can also be attributed to some financial professionals. Who is better qualified to know 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 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 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 Montgomery real estate, Oswego real estate, St. Charles real estate, Batavia real estate, Naperville 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 go forward with applying for a loan.