How People Lose To Foreclosure In A Subprime Market

The American Dream has always been to own your own home. Think of it! Free of rental payments going to someone and you gaining no equity in the property. It's frustrating.

So frustrating that many individuals make the jump from renters to owners, especially when the market is going great.  Take a couple from California who, tired of renting, told their kids that if they skip vacations and eating out so frequently, they could afford to buy a new home. 

The price of the house they were interested in buying was great at $567,000.  This was years ago when the house market was going great and then it down a couple of years afterwards.  They had to get into a loan that would allow them to ease into the high payments.  They didn't have much money for a down payment and were convinced by their mortgage broker to choose an adjustable rate mortgage, meaning they would have a few years of low payments.  Just what they needed, so they thought. 

Their mortgage broker told them not to worry.  In two years they could easily refinance and keep the rate down. 

But years later, they found out the hard way that it is nearly impossible to get your home refinanced if you have small money and little credit.  The banks and mortgage companies are no longer loaning to people who are a high credit risk.  So the couple in California got caught in a trap. 

What's worse is that brokers in the area tell them homes like theirs are fetching only $535,000.  This means that they are upside down on the mortgage, or the balance on their loan exceeds the actual value of their home. 

Hundreds of thousands of people will be caught in this same trap.  Everybody thought the boom in housing prices would continue.  What they did was jump into homeownership at a time when credit was easy, instead of waiting until they could someday afford payments.  But lenders are now enforcing stricter standards and not extending credit to these people. 

They will not lend since they have no collateral, no equity in their house, and generally upside down on their loans.  This is no longer an unusual situation.  That cushion of home equity will prevent a foreclosure and will keep you from having losing your home when you lose your job, have a critical illness, or your payments skyrocket like the couple in California. 

What you should do is scope out your situation and learn if you have anything that is close to what is mentioned here.  If so, the recommendation is to start looking for a foreclosure lawyer.  These foreclosure attorneys can help you and typically don't charge you anything unless they could save your home.