Home Foreclosure: What Happened And What You Need To Know

Home foreclosure has become a widespread problem this year. More homes will probably be foreclosed in the future. This mortgage crisis has become a tragedy for the families and individuals who have no other place to live. A lot of people hear about this crisis but most of them don't really know what is happening. A lot of people have suddenly started losing their homes and unable to pay their mortgage. Why are the banks and mortgage lenders suddenly getting rid of all these properties?

There are many possible reasons why a homeowner finds himself or herself in this situation. Apart from procrastination, unexpected emergencies can also happen. There are a times that cash is suddenly needed that greatly affects the budget. For people who don't have much this can be a very big problem. Paying with plastic is also a hard habit to give up. When we pay with credit cards its harder to keep track of your other expenses besides the monthly bills.

The main reason why homeowners are not able to catch up with their payment is because of rising mortgage rates. A few years ago banks decided to give mortgage loans to people who have financial crisis at a low rate. The bank then devised a new way to avoid payback risks. Homeowners were given adjustable rate mortgages.

The housing market suddenly took a turn for the worse. Houses which were selling for $300,000 before were now valued at $190,000 at best. Homeowners were stuck with adjustable rate mortgages because they can't refinance. Instead of paying $1,500 a month homeowners are now paying double the price to keep up with their mortgage payments. Their rates may start off at 5% to 7% but increase as the year passes. Soon homeowners find themselves with 10% to 12% mortgage rates that they can no longer afford.

This still happens today as other homeowners are tricked or mislead by mortgage lenders. Homeowners assume that the value of their homes will increase and refinance after a year or two while paying a fixed rate. They don't know that these rates increase over time to very high levels that will eventually lead to foreclosure.

If you don't want your house to fall into a home foreclosure trap, be sure to read the fine print. Calculating your odds in the future will also be a good idea. More often than not the real reason is not missing the payment but not being able to afford it.