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I have mentioned previously here about the various companies that invest in mortgages. These companies, some of which have tenuous ties with the federal government such as Freddie Mac and Fannie Mae, have come under scrutiny because of the very purpose they were designed to serve. In a nutshell, these companies purchase mortgages in order to keep the money available by lenders available to you.
These companies are encouraging the lending community to make loans that are considered in the high risk end of the scale. The cause for concern comes when banks continue to make loans to folks who are not able to make the payments necessary. Especially in a market that is starting to slow down. Even in good times, this is a hazardous way to do business.
Banks are trying a number of techniques to get the money out there to what is considered a riskier home buyer. This is and can be good news for the BlueCollarDollar reader. Provided you don't bite off more than your finances can handle. Some banks are using investments in the stock market as collateral if coming up with cash is a problem. The penalties are high should the value of what you put up become less than it was at signing. Some banks are even offering nothing down type of loans.
Banks are also pushing into the area called Subprime. These are borrowers with credit problems. But these types of loans foreclose four times as much as loans of the traditional 10% down.
Do you qualify? Possibly. Should you try? Possibly. Although I don't recommend it if there is some dubious credit history in your present or past. these things really do need to be addressed. Taking care of your debt situation is better for the long term and will allow you a more peaceful purchasing experience. Homes have often been called enormous holes in the ground where you throw money. Go in knowing that it will take a certain amount of cash to maintain the house, fix it up, decorate, landscape. The list can go on and on. So don't agree to a loan that will create cash flow problems just because someone wants to write you a great deal on a home. Take care of the big issues first. Deal with the debt you already have. Oh, and happy house hunting.
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