Will the Foreclosures Affect Even Me?

This credit market crisis we've been talking about here is serious, and you will probably be affected by it in very real ways - maybe from the local economy to possibly losing your job. Did you know that 20,000 jobs were lost in the mortgage industry in August 2007? The most significant impact we feel you will experience will be to your home - probably your most valuable possession.

How Will the Foreclosure Market Affect Me?

So how will the mortgage meltdown trickle down to affect you? Follow along - The base of the problem is that many, many homeowners have huge mortgages that they just really can't afford - these are mortgages they shouldn't have received in the first place - and they are being foreclosed on because of the now higher interest rates. It's true; foreclosures doubled in September when compared to last year.

Do They Still Offer ARM's?

Many people who took out mortgages in 2004 and 2005 got those adjustable-rate mortgages, or ARM loans, with the super low teaser rates. And now, with interest rates adjusting, the big mortgage payments are just too much for most. Some increases have been as much as 30 percent! Yes, that is a major deal that most can't handle. Many will lost the home because they can't keep up.

So what may happen that will affect you? If your neighbor has one of those "ARMs" and he can't refinance, he may go through foreclosure. That is bad for you because your home with so many homes in the area up for sale. These properties aren't selling because many people can't qualify for a mortgage. Lenders have dropped off the map, going out of business. And with tougher credit standards, it really does affect homes on the market.

Buying Homes as an Investment, Now Foreclosed

A neighbor here tells the story of how many investor types bought homes with the purpose of renting them out or quickly reselling them, but as the market slowed, they had no choice but to jump ship. What they do is simply stop communicating with the lender and move out of state. But this is bad for you because this causes additional homes to flood the already full market. With new homes on the market, your home will likely drop in value.

The market will affect you. If you are looking to buy a home, then timing could not be better for you. But whatever you do we recommend getting a fixed rate mortgage. If you do have an ARM and you plan to be in your home from 5 to 7 years, switch to a fixed rate as soon as possible. The adjustable part is why all this mess is happening and you don't want part of that.

If you own your own home, now might be a good time to get a home equity line of credit because as home prices drop, you want the credit line based on the value NOW, not when it may be worth less. If you don't use it - it won't cost you anything.