Housing Market And The Foreclosure Crisis

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The financial crisis that occurred in 2007-2008 is narrowly related to what happened with the housing market and the foreclosure crisis. In 2006, the housing market peaked due to newly available loans such as interest adjustable loans, interest only loans, and zero down loans for people with low-income jobs. Housing prices were increasing radically and new homeowners were taking out mortgages that they would be unable to pay for in the future, all in order to be able to afford homes with such steep real estate value. By 2007, things began to go downhill. Interest rates had begun to rise steeply, mortgage companies had to file bankruptcy, and banks across the country required bailout funds from the U.S. Treasury in an effort to recover…show more content…
According to Scott Schang, in order to qualify one has to have undergone a 20% loss of income for a minimum of six months, the loss of income had to have resulted in an economic crisis such as bankruptcy, foreclosure, or short sale, there must be correlation between the loss of income and the hardship, and there must be evidence of recuperation from that hardship with 12 months of timely payments. Schang also states that after qualifying, one has to prove they have satisfactory credit and documentation of their loss of employment. After that, they must undergo housing counseling before they can be approved for the loan. Many boomerang buyers who have worked hard to rebuild their credit score over the last few years have just taken out an FHA loan. An FHA loan has a three-year waiting period, currently a 3.5-4.0% down payment, and a minimum credit score requirement of 640, as well as monthly mortgage insurance payments.A considerable amount of boomerang buyers and even first time buyers have just taken out an FHA loan, intending to refinance to a conventional loan in the future. A conventional loan essentially a loan not issued by the government. First of all, many people do this because if they werea victim of foreclosure they would be unable to take out a conventional loan for seven years. Many people choose to refinance because it offers a change in loan structure and lower monthly payments as well. Conventional loans also offer more in
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