Why have relatively small sub prime mortgage problem cause such big credit crunch??
Even for borrowers with good credtit rating?
Answers:
Three things caused the problem: speculative home building, interest only loans, and adjustable rate mortgages. And, here were tons of each.
Check out http://www.mortgagefigure.com there is lots of information about refinancing, consolidation, doomed to failure credit mortgages and more.
I don't feel it is the sub prime mortgage problem that caused it. It was two things.
First be people doing the interest only loans so they coud buy more house than they could generally afford. They figured when the loan came due contained by five years, they could sell the house at a profit and do it again, or refinance at about matching rate and they would be making more money so they really could afford the house.
Second is what ruined people in the first member above, the housing industry tanked. New home construction out paced demand. The unusual home builders had to sell for a lower price to attain back some of their investment. When tha happened, sale of existing homes plummeted. I mean, would you buy a new home or a used home if they be of comparable size and price?
So, because they could sell their houses for a profit, their incomes didn't go as elevated as they hoped and interest rates rose, people couldn't afford to keep their houses and it started a downward spiral.
Next time, don't buy more house than you can afford should be the rally cry.
Related Questions:
Paying mortgage near a credit card?
Does anyone have a mortgage company that will let you reimburse with a credit card? I want the rewards. I want to pay my mortgage and after turn around and pay off the card online. Good conception or not? Please explain. REALLY BAD IDEA!...
Answers:
Three things caused the problem: speculative home building, interest only loans, and adjustable rate mortgages. And, here were tons of each.
Check out http://www.mortgagefigure.com there is lots of information about refinancing, consolidation, doomed to failure credit mortgages and more.
I don't feel it is the sub prime mortgage problem that caused it. It was two things.
First be people doing the interest only loans so they coud buy more house than they could generally afford. They figured when the loan came due contained by five years, they could sell the house at a profit and do it again, or refinance at about matching rate and they would be making more money so they really could afford the house.
Second is what ruined people in the first member above, the housing industry tanked. New home construction out paced demand. The unusual home builders had to sell for a lower price to attain back some of their investment. When tha happened, sale of existing homes plummeted. I mean, would you buy a new home or a used home if they be of comparable size and price?
So, because they could sell their houses for a profit, their incomes didn't go as elevated as they hoped and interest rates rose, people couldn't afford to keep their houses and it started a downward spiral.
Next time, don't buy more house than you can afford should be the rally cry.
Related Questions:
Paying mortgage near a credit card?
Does anyone have a mortgage company that will let you reimburse with a credit card? I want the rewards. I want to pay my mortgage and after turn around and pay off the card online. Good conception or not? Please explain. REALLY BAD IDEA!...