Housing Market And The Foreclosure Crisis

If you have considered applying for an FHA loan, then you should become familiar with the FHA requirements so that you know what to expect. There are plenty of good reasons to choose FHA over conventional, so whether you are a first time homebuyer, or you are wishing to refinance your current home loan, you can talk to a professional about getting approved for an FHA loan. The FHA loan requirements make it clear, that your first step is in knowing how much you can afford when considering buying a home. For this, there is a specific calculation that compares your current gross income to your existing debts in order to provide a maximum loan amount that you can qualify for. The guidelines are such that it forces to consider what can fit into your budget rather than focusing on what the maximum is you can borrow. Whether you are purchasing a home, or refinancing your current home loan, your FHA loan will be built around having a reasonable debt to income ratio, so what you budget for is important. The second step is getting qualified. In a sense, you will still have to qualify even for a refinance. An FHA loan is not necessarily based on credit score, but it is based on several factors. Pay history, job time, and income are all a part of what helps you to qualify. The FHA requirements want you to show that you have the ability to repay the loan. Your loan will be driven by the documentation that you can provide, such as w2 's, tax returns, insurance, and above all good pay

The bursting of the housing bubble, known more colloquially as the 2008 mortgage crisis, was preceded by a series of ill-fated circumstances that culminated in what has been considered to be the worst financial downfall since the Great Depression. After experiencing a near-unprecedented increase in housing prices from January 2002 until mid-2006, a phenomenon that was steadily fed by unregulated mortgage practices, the market steadily declined and the prior housing boom subsided as well. When housing prices dropped to about 25 percent below the peak level achieved in 2006 toward the close of 2008, liquidity and capital disappeared from the market.

The Federal Housing Authority has put a similar plan together called the “Back to Work Program” which can help the buyer return to the housing market in as little as one year if the buyer is able to meet certain guidelines. The guidelines included in the “Back to Work Program” are: the buyer must pay their bills on time, had a 20 percent reduction in income, and a minimum credit score of 620. The “Back to Work Program”, has strict guidelines to make sure that the buyer is responsible, they must pay their bills on time and cannot miss one payment, or else they will be ineligible for the program. The 20 percent reduction in income must be demonstrated to be in the result of loss of employment and the reduction in income must be for a duration of 6 months. The Federal Housing Authority primarily requires the boomerang buyerthat is purchasing a home to have an hour long credit counseling session with the Department of Housing and Urban Development, after the session is completed a plan is created for the buyer.

Since this paper only touches upon the basics of this plan, it will only explain three priority groups (keeping in mind that various subgroups can be created for a broader variety of situations). The highest priority group (Group A) must meet the requirements that follow. Homes must have been bought before January 1st, 2009, and the loans must have been financed by Fannie Mae or Freddie Mac. Borrowers must be current on their payments, and must not have missed a payment for one year before requesting the refinance. The group with the second highest priority (Group B) could have purchased their home either before or after January 1st, 2009. However, if the loan was taken out after the date, residents must wait one year (with no missed payments) to apply. Those who qualify for Group B must not have any delinquencies yet, but they can have missed two payments at the most. Therefore, while they do not have to be current on their payments, if they exceed missing two payments, resulting in a delinquency, they must be eligible for Group C. This lower priority group must have a delinquency, before or after the bank starts the process of foreclosure. This group would need to be behind on their payments, missing at least three. While all of these groups are eligible for a refinance, Group A will be able to refinance for the greatest volume of customers at the highest loan

Many consumers who are looking to purchase a home again with the recovery of the housing market may not have the ideal financial background to get started. In order to discover whether or not they qualify, these potential borrowers should first consult with a mortgage professional, such as a

The economic crisis that hit the country took many jobs or people had their hours cut. With this situation happening, many people were finding themselves short on their mortgage payments and needing to go into foreclosure or having a short sale on their homes. Either option the homeowner chose or had chosen for them, they found themselves with poor credit and no way to become homeowners again. However, most wait times before was a minimum of two years up to seven years before that previous owner could be eligible for traditional loans.

I often used to watch a show called “Extreme Makeover” where a team of builders would come to a neighborhood, build a need worthy family a beautiful new home, and then just give it to them. “Wow! What a lucky family,” I would say. “How fortunate.” However, as time went by, that same family would be in the news again. Why? The house was in foreclosure. The people had gone to the bank and taken out a mortgage against the home, then spent all the money they got for it on other things.

When the housing bubble burst in 2007, 7.3 million borrowers lost their homes due to foreclosure or short sale. These “boomerang buyers” are slowly but surely recovering from financial setbacks and reentering the housing market. Conventional lenders have seasoning requirements that prevent buyers from obtaining a new mortgage until they have repaired their credit: a seven-year window for foreclosures and four years for short sales.

There are several ways to work around these struggles. The first and most obvious method is to rebuild their credit report. This will make future loan request simpler; and they will have a higher chance of being approved for new credit cards. The second method is to pursue a rent-to-own contract. This pathway is easier for approval due to the fact that most of these types of contracts are done by the owner of the home. The third method is by seeking assistance from the federal government through the HUD program.

There were many people affected by the most recent recession and therefore forced to foreclose on their homes. Losing a home due to foreclosure leaves a big black eye on an individual’s credit score and forces these people to be patient until they are approved to rejoin the housing market. “Boomerang buyers” are a group of potential homeowners who are re-entering the housing market after losing their homes due to foreclosure.

I was unlucky enough to be front and center working for a homebuilder at the time of the real estate crisis. The mindset of sellers, realtors and mortgage brokers before the “bubble burst” was something that was very obvious to me as a lack of care for the long term homeowners and their financial welfare. While the banks like Countrywide Home Loans and Bear Stearns (JPMorgan Chase Bank) were making billions of dollars on mortgages, they were ridiculous in thinking that this would not come back on them tenfold. How can you purchase a loan and approve it through underwriting without first verifying the documents were accurate? How could I get a home loan when I was 21 and had a credit score of 1? Well, this definitely happened. I had a cosigner, of course, but still, the qualifying standards back in 2005 were relaxed to a fault. I liked to think that I was responsible enough to have this investment in a property to call my own, but we bought at the height of market in Orlando, and only gained in equity for about 6 months. In 2007, our house was worth $40,000.00 less than what we purchased it for.

It is very difficult to get a loan from a commercial bank for first-time homebuyers, and for existing homeowners who are in the process of foreclosure. The loan modification programs that are available now are bandages for a much bigger problem, the problem lies in the underlying banking system practices, polices and traditional way of doing business.

An FHA loan is the second most forgiving depending on the type of event. If you have gone through a bankruptcy, it is 2 years from the discharge date before you can officially qualify for an FHA loan program. If you have gone through a short sale or foreclosure it is 3 years from the change of title. If you have gone through a bankruptcy and you went through a foreclosure that was included in the bankruptcy you can qualify for an FHA loan with the shorter time period of 2 years instead of the normal 3 years with a foreclosure. There is also one other exception that could qualify you sooner than the 3 year waiting period if you have experienced a foreclosure or short sale. If you can show that your short sale or foreclosure was caused by extenuating circumstances such as a loss of a job, death, or serious medical condition, you may qualify for an FHA loan with 2 years of the foreclosure or short sale.

The light at the end of all this is that home ownership is possible again. I personally have been given a myriad of messages as to when I can buy a home again. Some have told me that I can buy a home again in as little as two years through a VA loan, others have said I must wait seven for another loan.

The 2008 financial crisis can be traced back to two factor, sub-prime mortgages and debt. Traditionally, it was considered difficult to get a mortgage if you had bad credit or did not have a steady form of income. Lenders did not want to take the risk that you might default on the loan. In the 2000s, investors in the U.S. and abroad looking for a low risk, high return investment started putting their money at the U.S. housing market. The thinking behind this was they could get a better return from the interest rates home owners paid on mortgages, than they could by investing in things like treasury bonds, which were paying extremely low interest. The global investors did not want to buy just individual mortgages. Instead, they bought