A Cooled Real Estate Market and Investing in Pre-foreclosures

Windowofworld.com – A Cooled Real Estate Market and Investing in Pre-foreclosures – With the housing market cooling and demand for mortgage loans shrinking, banks and other lenders are turning to nontraditional and sometimes riskier mortgages to bring in additional business and make up for their declining business.

Many lenders have turned to mortgage products designed to lower monthly loan payments and to help borrowers better prepare to qualify for larger loan amounts, while others require less documentation during the approval process. These loans make it easier for some people to get a mortgage, but they can also increase the likelihood that some borrowers may end up in foreclosure. For real estate investors or home buyers, these market conditions represent a window of opportunity

As the rate of appreciation of the monetary value of housing slows, more mortgages default on. Foreclosure notices have increased in recent months, providing another sign of a downturn in real estate markets across the US. For example in San Diego County, CA. Banks and other lenders sent 1,266 defaults to borrowers in the third quarter, notices that gave home owners 90 days to be current on payments before moving towards foreclosure auctions.

At the height of the real estate boom, double-digit increases in home equity meant customers could withdraw money from rising home equity to enjoy a lifestyle they really couldn’t afford. With the ability to take advantage of home equity loans, home owners have drawn cash for new cars, furniture, vacations and other luxuries. Another boost to their lifestyle is given when home owners refinance using an adjustable rate mortgage loan that cuts their monthly payments.

But now conditions are changing, in many regions of the country real estate prices have leveled off and are not even rising in some real estate markets. With little or no increase in home equity, or even lost equity, home owners can find themselves in a difficult position.

Additional strength is also impacting the housing market: A new federal law on credit card payments has shifted towards increasing the mandatory minimum payment of credit card debt. For many people, payments are now double what they were before. And, as energy prices and health care costs continue to rise to new all-time highs. More and more people are in financial situations where the money spent exceeds the money earned.

For first-time real estate investors or seasoned veterans, current market conditions are a window of opportunity for those shopping to purchase real estate properties before foreclosure. More and more home owners have withdrawn all their equity (sometimes as much as 110% of the value of their home.) And now the home’s value has gone down and they are flipping over – that they owe more than they can sell the house. Stuck in a situation where they can’t pay their debt and they can’t find a buyer for their home, real estate investors who understand the default process can offer solutions that offer homeowners by default a way to escape their mortgage payments. and for investors a way to secure property in the process.