Problems in the subprime mortgage market have dominated real estate news this year, making many Americans hesitant to buy, sell, or alter their mortgage in any way. Let’s take a look at what led to the subprime mortgage crisis, and how you can avoid the roadblocks.

In 2001 the Federal Reserve slashed interested rates 11 times, dropping the key lending rate dramatically. As a result, demand increased across the country and home prices rose very quickly in hot spots like California and Florida. Then, from 2004 to 2006, 17 interest rate hikes started to take their toll. The higher rates particularly affected Americans who had purchased homes with an adjustable rate mortgage.

In 2007, foreclosures have soared, up 93 percent from one year ago. The subprime mortgage crisis is affecting the financial industry on an international scale, and the Federal Reserve recently cut the interest rate at which they lend to banks to try to keep credit flowing.

The Mortgage Bankers Association expects home sales to decline this year as lenders make it more difficult to get mortgages approved. Mortgage originators have tightened underwriting standards in response to mounting defaults and foreclosures on loans to borrowers with blemished credit histories.

The best way to avoid a subprime mortgage is to improve your credit rating and ensure you are in a good financial position to pay any loan you acquire. Improve your credit rating by paying your bills on time, paying down your debts, and participating in credit counseling. Credit Enhancement Coaching from Financial Freedom can help you accomplish these goals by analyzing and then helping you directly improve your credit report.

If you are currently renting but seeking homeownership, Financial Freedom’s Lease to Own Program is for you. If you have poor credit or lack money for a downpayment, this program will help you avoid a subprime mortgage. An investor will purchase a home that you can lease for 12 months while Financial Freedom helps you prepare for homeownership.

This entry was posted on Tuesday, October 23rd, 2007 at 2:00 pm and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.