Home Loans ? Lenders Continue to Offer High-Risk Loans

Home prices in the Untied States continue to soar, and the remarkable run of real estate as the "must have" investment continues. The median price of a new home, which only recently crossed the $200,000 barrier, is now $215,000. The high prices of homes haven't deterred buyers; sales in June reached a record number of units. There is some concern in Washington about the explosive real estate market, and Federal banking regulators issued lending guidelines in May that urged lenders to be more cautious when lending money for home purchases. How have lenders responded to these guidelines?

They have made it even easier to borrow money.

It seems rather odd for lenders to make it easier to lend money after having been warned that they've been lending money too easily, but that's exactly what has happened. Some banks have lowered the minimum credit score necessary to obtain a home loan or increased the percentage of income that may be spent on a mortgage. Others have introduced loans that require no proof of income. Still others have begun offering a wider variety of no-interest loans and dangerous Option ARM loans, which can actually raise the principal of a loan after a buyer makes a payment. Why are lenders easing loan restrictions after being warned that they are too lenient?

The primary reason is competition. The market is red hot right now, and due to the fluctuations in the stock market in the last five years, everyone wants to invest money in real estate. With so many people flocking to borrow money, lenders want to do as much business as possible. They also want to do more business than their competitors. By lowering qualifying standards, lenders can lend more money. It's that simple.

There are several problems with this scenario. Some percentage of buyers will always default on their mortgages. When the standards for obtaining a loan are lowered, that percentage will certainly increase. While foreclosures currently remain low, they combination of lowered standards and rising prices will certainly contribute to an increase. An expected increase in interest rates would make the situation worse.

The effects of these changes in lending can be felt by most anyone. If you are considering buying a home with a mortgage, be careful. Don't automatically assume that you will be comfortable making a $3000 house payment just because the lender tells you that you "qualify" for it. You must still leave within your own means, and the mortgage broker isn't really concerned about that. He or she just wants to sell the loan, and doing so may not be in your best interest.

If you are going to take out a home loan, create a budget and determine how much you can comfortably pay each month. That figure will undoubtedly be less than what your broker is willing to offer. Stick with your own figure, and don't let the fever of the marketplace sway you. After all, you are the one who has to make the payment each month.

©Copyright 2005 by Retro Marketing.

Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a site devoted to personal bankruptcy, debt consolidation and credit counseling, and HomeEquityHelp.com, a site devoted to information regarding mortgages and home equity loans.

---

Home Loan Applications Made Easy

You have finally found the home of your dreams. You... Read More

Online Mortgage in UK - Introducing the Best Mortgage Plan Across UK

Add the term 'online' and it will open for you... Read More

Bad Credit Mortgage Loans - Are You Killing Your Chances of Getting Approved?

When you have poor credit, your list of lenders that... Read More

What is a Flexible Mortgage?

'Flexible mortgage' is a term that's used a lot, but... Read More

Tips for First Time Home Buyers

When looking at tips for first time home buyers, you've... Read More

Buying a Home when Rates go Up

Many people fret the rising tide of interest rates. You'll... Read More

Real Estate Mortgage Loans Online

Online real estate mortgage loans enable borrowers to be sure... Read More

Home Equity Loans

A home equity loan allows you to cash-in on the... Read More

Securing a Cheap Home Improvement Loan

Finding a cheap home improvement loan can be a challenge... Read More

What is a Repayment Mortgage?

A repayment mortgage is the type of mortgage that most... Read More

Refinance Benefits - Refinancing Could Save You Money

The most common reason most people refinance is to save... Read More

A Guide to Getting a Bad Credit Remortgage

There are several reasons why you might be in the... Read More

Construction Loan Basics

It might not be too big of an exaggeration to... Read More

Applying for a Home Loan

Applying for a home loan may not be the most... Read More

Home Buyers Face Decisions that Affect Their Long-Term Financial Picture

Taking the step for prospective home buyers.into home ownership is... Read More

Remortgage Serves To Rewind The Reimbursements Of Mortgage

It takes a mighty big effort to secure a home... Read More

What to Really Expect for Closing Costs

Closing on a property is a very challenging time for... Read More

Homeowner Loans - Whats Available?

It isn't difficult to get a homeowner loan if you... Read More

Why Refinance Back into a 30-Year Loan?

One of the biggest reasons homeowners refinance their mortgage is... Read More

What is a Current Account Mortgage?

Current account mortgages are fairly new to the sector. They... Read More

Home Loans and Mortgages ? Beware of Deed Theft Scam

The average home in the United States has a value... Read More

Option ARM ? The World?s Most Dangerous Mortgage

Home prices have reached record levels, and in many parts... Read More

Home Loans

Buying a home remains the great American dream. Home ownership... Read More

Sorting through mortgage elimination programs

Mortgage elimination programs are all the rage these days. In... Read More

Finding the Best Home Improvement Loans

When the time comes to do work around the house,... Read More

Home Mortgage Interest Rates: How to Compare

Whether you are looking to purchase your first home, sell... Read More

Home Equity Loan ? Not Just For Home Repairs, And Tax Deductible, Too!

Thanks to the combination of low interest rates and skyrocketing... Read More

Types of Home Equity Loans

There are at least two types of home equity loans.The... Read More

Key an Eye on Your Mortgage Payments

In previous decades, when a borrower missed a payment on... Read More

Refinancing Your Mortgage Can Open Up A Lot Of Options For You And Your Family

It can happen to anyone, the roof is leaking, the... Read More

Thought You Can Go All Alone In Mortgages! Mortgage Advice Beneficial In All Important Decisions

Mortgages are easy as long as you understand them well.... Read More

Home Mortgage Loans - Fixed Rate, Adjustable or Balloon, Which One Is Right For You?

When you're shopping for a new home-especially for the first... Read More

Home Equity Loan ? A Reverse Mortgage Could Provide a Comfortable Retirement!

While only comprising about 1% of all mortgages, the reverse... Read More