The ups and downs of the housing market have greatly influenced America’s economy over the last decade. After taking a disturbing plunge in the mid-2000s, the housing market has had a long way to go. Some analysts see a renewed hope in the market. Many borrowers are returning to credit-worthy homebuyer status. However, banks remain strict with their lending guidelines; the effect on the market remains unpredictable.
It is estimated that over five million people have lost their homes since 2007. Those who lost their homes earliest are just now recovering from the damage that their foreclosures did to their credit. This new category of homebuyers is unique because they represent former homeowners re-entering the market. Some smaller lenders are becoming fierce competition for the larger lenders who have commenced foreclosure actions against these homebuyers in the past. Due to penalties suffered by the larger banks that engaged in sub-prime lending, they are often not allowed to provide loans as easily as they were in the past. More stringent lending requirements are often the main stumbling block.
As a result, consumers are obtaining the most competitive interest rates and mortgage terms in years. FHA programs allow homeowners that are one to three years removed from a foreclosure to obtain a mortgage. Smaller lenders are allowing this new wave of homebuyers a second chance at home ownership through these FHA loans. They may ultimately outpace the larger lenders.
Although banks have started catering to a new wave of eligible homebuyers, they have not yet returned to the lax lending policies that contributed to the mortgage crisis. These new, potential homeowners are already making waves in the economy, increasing competition between big and small banks. While this alone will not jumpstart the economy, it is a positive step in the right direction.
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