The real estate world has known for a while, yet lots have been hesitant to read what it says. Many residents of the United States are getting deeper into debt. Part of this problem likely comes from the expense of owning a home. For a larger segment of homeowners, the cost of home ownership is forcing a difficult situation into an impossible one; creating a ?foreclosure crisis? that will likely last several more years.

Earlier this year, current numbers released by the Government are showing an alarming growth in the rate of foreclosures. In some areas, of all homeowners 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 traditionally specialize in extending financing to borrowers with credit problems, unable to verify income, employment or other factors that make them a poor fit for traditional financing. In the past few months, 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 rate of default we are now seeing.

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

A good portion of the resons can be laid at the feet of the borrowers themselves. In this age of ?bigger is better? 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 how much they can afford and end up in a difficult situation or worse.

Blame can also be laid at the feet of some lenders. 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 offering 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 presented problems for borrowers.

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, Montgomery real estate, Geneva 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.