Sub Prime Mortgage Crisis

Although subprime mortgages have been available since early 1982, they did not gain popularity until the mid-1990s, making them a relatively new phenomenon in the mortgage industry. Simply put, subprime mortgages cost more than conventional (prime) mortgages, but they allow borrowers with “less than perfect credit” or small down payments access to homeownership. Because of their higher chance of defaulting, these borrowers would otherwise have been denied credit.
Many homebuyers have benefited from subprime mortgages. But those with adjustable-rate mortgages (ARMs, a common subprime loan), which offered a lower initial interest rate in 2003 through 2005, are now seeing their first rate adjustment. Consequently, homeowners with an ARM at a low initial start rate will now see their payments increase significantly. Because mortgage underwriters allowed high debt-to-income ratios or loose income documentation, even the small increase thus far has pushed the subprime loan delinquency rate to unprecedented levels resulting higher delinquency rates and, in many cases, foreclosure. Although the financial mechanics of crisis making is much more complicated than the above, this weakening of the foundation of the mortgage market has shaken the entire structure to the point that many of the largest financial institutions in the world are in a substantially weakened economic position.
Still, subprime loans are only a small fraction of the overall housing market and the demand for housing over the longer term will ultimately depend on the fundamentals, such as gains in jobs and incomes, and low mortgage rates. In addition, the issues with subprime lending has negatively affected the economy and revealed possible weaknesses in financial markets. The overall economy outside of the housing sector remains on shaky ground as well, and further action to stimulate and/or stabilize the economy is indicated.
The federal government has instituted measures to assist homeowners with their sub prime mortgages and the Federal Reserve is poised to lower interest rates again, which has already resulted in interest rates below 6% for a thirty year fixed rate mortgage.The northeast Oklahoma housing economy and market has been stable and although a slowing has been observed in recent months, it is attributable to seasonal adjustments as much as anything. The “housing bubble” that has affected so much of the nation has had an insignificant impact on the northeast Oklahoma economy. Appreciation in our home values typically are in the 3-5 per cent/per year range and this reflects the conservative growth of our housing market. Oklahoma remains one of the best places in the nation to buy and own a home.

How Much Home Can You Afford?

The first step in finding a home is figuring out how much you can afford to spend. We'll look at several different factors to consider when making this decision.
Taking out a mortgage is probably the biggest challenge facing prospective homeowners. The lender will want to ask you all sorts of nosy questions about your income and savings (or lack thereof), and then might not even lend you as much as you need. Of course, there is a reason for this. Put yourself in the lender’s shoes: If you were going to lend people money, what would you want to know about them? Basically, you'd like to know 1) if they make enough money to pay you back, 2) if they've been trustworthy in the past, and 3) if they have something of value should they be unable to pay you back
Do you make enough to pay the lender back?
Your lender will want to know how much money you make. Also, what are your other debts? Do you owe money for college loans or credit card charges? Do you have any other assets? Ideally, you will want to come up with at least 20% of the value of your new home as a down payment, to avoid things like mortgage insurance payments. But, you probably qualify for plenty of financing arrangements that will get you into a new home for as little as 0% of the asking price The lender will also plug your income numbers into a couple of formulas: the front-end ratio (having to do with your mortgage payments) and the back-end ratio (having to do with your debt) to come up with your debt-to-income (DTI) ratio.
Have you been trustworthy in the past?
What is your credit rating? Your credit report -- a nifty little compilation of your personal financial history -- will reveal whether you have a track record of paying your bills on time. If not, there are ways to clean up your credit that will make you more attractive to lenders.
Do you have any collateral?
The house you buy will generally be considered collateral for your mortgage. As a result, in case you can't repay the loan, the lender can decide to do foreclose on the mortgage and repossess the house
What are your considerations?
Now, let's look at a few things from your point of view.
Your Timeline
To determine whether you should buy a new home, think about how long you're planning to stay in it. It generally doesn't make economic sense to buy if you are only planning to stay there for a couple of years. Why? Because you are going to be paying fees to buy and then to sell your house. It would have to appreciate in value very quickly between the time you buy it and the time you sell it to make it financially worthwhile.
Your Comfort Zone
Before you borrow $90,000, $200,000, or whatever you need for your mortgage, figure out whether you can really afford it. Just because the lender will loan it to you, doesn't mean that you will want to live your life in such a way as to be able to pay it back. Are you planning to have a big family? Would you rather replace your econo car with a new Mercedes? Your house payment is just one piece of your financial puzzle. What might you need to give up to make that house a reality and are you really willing to do it?

Mortgage Buzz Words

Each industry has it's own particular language and the mortgage buisiness is no different. Your home purchase or refinance have many of these words in common. Here are a few of the terms that you will encounter in your search for the perfect financing for your home loan. Additionally, here is a link http://www.fha.gov/glossary.cfm to a very extensive mortgage glossary compiled by HUD.

• ARM: Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the change in monthly payment amount, however, is usually subject to a cap.
• Cash-Out Refinance: when a borrower refinances a mortgage at a higher principal amount to get additional money. Usually this occurs when the property has appreciated in value.
• Closing Costs: fees for final property transfer not included in the price of the property. Typical closing costs include charges for the mortgage loan such as origination fees, discount points, appraisal fee, survey, title insurance, legal fees, real estate professional fees, prepayment of taxes and insurance, and real estate transfer taxes.
• Conforming loan: is a loan that does not exceed Fannie Mae's and Freddie Mac's loan limits. Freddie Mac and Fannie Mae loans are referred to as conforming loans.
• Conventional Loan: a private sector loan, one that is not guaranteed or insured by the U.S. government.
• FHA: Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.

Well, that's a start. Don't hesitate to post questions on these or any other real estate related topic.