Subprime Mortgage Crisis

The subprime mortgage crisis occurred because too many lenders gave mortgages to people that couldn’t pay them off.

When the holders of the mortgages weren’t able to pay their mortgages the lenders began to lose money. Many of these lenders went out of business which affected other areas of the economy. Many Wall Street firms and banks had invested heavily in subprime mortgages so they lost money too. Some of these financial institutions eventually had to be bailed out by the federal government. The news media labeled this catastrophe the subprime mortgage crisis.

A subprime mortgage is a mortgage that doesn’t qualify for the regular or prime mortgage interest rate. Mortgages with the prime interest rate are usually only given to people with good credit ratings who can prove they have the income to pay them off. Subprime mortgages were given to individuals with low incomes and bad credit rates. 

How the Subprime Mortgage Crisis Affects You

If you have good credit and a good income the subprime mortgage crisis should not affect your ability to get a mortgage or buy a home. Prime mortgages are still available and interest rates have recently been at historic lowers.

Home prices are also lower because large numbers of foreclosed homes are on the market. Many subprime mortgages have been foreclosed on which means more houses are for sale. Those who can qualify for a mortgage should have no trouble finding a home.

The government is also trying to encourage home ownership by making tax credits available to those who are willing to buy houses. In 2010 new home buyers will be able to qualify for an $8,000 tax credit to purchase a home and existing home owners can qualify for other tax credits

Subprime Mortgage Holders

The subprime mortgage crisis has been a catastrophe for many people who have subprime mortgages. Many of these individuals have not been able to make their mortgage payments.

Many of these homeowners are facing foreclosure and many homes have already been foreclosed on. Foreclosure means that the lender takes possession of the home and evicts the owner.

Some communities have seen so many foreclosures that they are facing a foreclosure crisis. This has driven down property values and made homes more affordable in some areas.

Subprime Mortgage Crisis Opportunities

The subprime mortgage crisis presents some interesting opportunities for those who still have money. Many people will be able to take advantage of this crisis to buy a home, house prices are lower and so are interest rates. Those who qualify for a mortgage should consider buying now.

Individuals who want to invest in real estate or become landlords should be able to get some good deals on rental property at this time. Large numbers of houses are sitting empty and banks are looking for buyers.

People with cash might able to pick up some of these houses at low prices and resell or rent them.  Now is an excellent time for those with money to start investing in real estate.
The subprime mortgage crisis has been a catastrophe for some and an opportunity for others.