How Does the Foreclosure Crisis Affect You?

If you own your home and you are making payments on it each month, you might not think the mortgage foreclosure crisis will affect you in any way. You might even have great job security and you may be close to paying off your mortgage, but the number of foreclosures happening across the country may still have an impact on you.

If you own a business in one of the ski towns in the western part of the country, for instance, you may notice a large drop in sales and customers for the upcoming season. The fall season is typically the busiest for this area as people enjoy visiting states like Colorado, Utah and others for the great skiing opportunities. Some businesses in those areas depend on the tourists during this season for a huge chunk of their annual revenue.

Since these ski areas are often popular places for second homes and vacation properties, analysts are expecting these areas to be much less visited than previous years. Many people are having problems making their payments on their primary residences so they are letting their second homes go back to the bank through foreclosure. As a result, there will probably be a lot of empty homes in the tourist ski destinations this season and fewer customers for the surrounding businesses.

But even if you aren’t a homeowner, this foreclosure problem affects you. These foreclosures are the result of the banks not being careful enough when choosing buyers who qualify for a mortgage. Many of these people didn’t even have jobs or a viable means for affording their monthly mortgage payments. Because of what has happened the last couple years, banks are being ultra conservative with who they loan money to. This means the average potential homebuyer with a few dings on their credit but good job security and the desire to own a home will be denied a mortgage loan at today’s historically low rates. In many cases, these buyers may not even qualify because the banks want very good credit scores before they even consider your application.

A third result of the foreclosure crisis is that it is driving the housing prices down. With so many foreclosed homes on the market, that raises the supply. Combined with the decreased demand because of so many unqualified candidates, home prices are falling quickly and drastically. This means if you want to sell your home any time soon, you probably won’t get as much for it as you would like to.

This mortgage crisis is affecting everybody. It’s not just something that is affecting the irresponsible buyers and lenders who never should have provided a loan in the first place. Hopefully with all the lessons learned, lenders and buyers will be more responsible so this doesn’t happen again.