So let’s go back a few years; back to 2007 to be exact. Do you remember what happened? Did it affect you in some way as it did to millions of people?
Let’s review: in 2007, the United States economic system entered a mortgage crisis that brought on world-wide panic and monetary disorder. The financial markets turned volatile and the effects are still being felt today. The subprime mortgage crisis was the direct result of flawed or criminal lending practices, largely based on the belief that home prices would only increase.
Being a homeowner is the ultimate “American Dream.” However, it will probably be the costliest expense you ever make in your life as homes don’t come cheap and you need to borrow the money to make the purchase.
Sometime in the early 2000s, there were a record number of home buyers. Back then the interest rates were very low, allowing potential home buyers to get fairly large loans with lower monthly payments. Some payments were cheaper than actually renting. As a result of this, home prices increased considerably, so purchasing a home seemed like a smart investment, and it usually is. Banks believe homes are great collateral, so they had no problems lending the money as long as things remained on the up-swing.
Regrettably, disaster began to heighten in 2007 as home prices froze or slowed down from the extremely rapid pace that it had managed to maintain. Home prices began to topple downwards in 2006. Homeowners, who took out loans much bigger than they actually needed, ultimately stopped making their payments. To make things worse, as adjustable interest rates rose, so did the monthly payments.
Borrowers with un-affordable houses were left with few choices: foreclosure, renegotiate with the bank, or just walk away. Many chose the latter. Soon after, massive layoffs started to occur. So not only were you losing your home, you were also losing your job; your only means of sustainability. It has taken years for the economy to get back on course, however, things are still not the same as they were in the 90s.