subject: Subprime Mortgage In Mesa [print this page] A credit crunch has additionally been described as a capital crunch. There is usually a shortage in equity capital, and this limits lenders' abilities to make loans, and this is especially true in regions that have been most affected by the subprime mortgage and financial crisis. In a credit crunch, the lenders quit lending, and instead they hoard their capital, as they are afraid of loaning out too much money with the increasing bankruptcies, job losses, and mortgage defaults, as well as additional factors which boost the risks of an individual not being capable of repaying a loan
The effect on the real estate market is that there is less money available for mortgages. With the lack of money to fund mortgages, an excess supply of homes for sale develops. Perhaps causing them to quit building totally, this oversupply of houses causes builders to become more cautious in building new houses. This was evident in areas of the nation where bankruptcies and foreclosures exacerbated an already saturated real estate market.
Foreclosures, bankruptcies, and job losses caused individuals to receive poor scores from their credit reports, and this caused even lower credit scores. Low credit scores increase the difficulty of securing credit at all, much less getting good terms on a loan. Further, given the increasing bankruptcies, defaults and foreclosures, banks clamped down on their lending criteria until their standards became excessively restrictive. .
Persons who ought to have been able to receive approval for mortgage loans were rejected. As fewer people were able to buy houses, there were even more surplus houses on the market that couldn't be sold. The excessive number of houses for sale must be resolved for the market to rejuvenate, but several factors, not the least of which is inordinately restrictive mortgage lending policy, are creating a drag on the recovery. .
The drop in value of homes, in some areas of 25% or more, also has affected the housing market. There are cases where home values have crashed and burned so badly that numerous individuals then owed more on the mortgage than the house was really worth; this caused a number of persons to choose to abandon payments on their mortgage in order to go through foreclosure instead of staying in this hopeless situation
For people who want to buy a house, but can't get the necessary financing, the best advice is to be patient and not give up in despair. If they have a bad credit report for some reason, they should take whatever measures they can to improve their credit rating. As restrictions ease, they will find it easier to qualify for a mortgage loan, and they will eventually get into the house that they want.
by: Logan Oulman
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