As a Loan Officer who specialized in helping people obtained homes in the past, I can see hard times ahead for people who are suffering from bad credit. Recent stories in the news are giving people with poor and bad credit a big rap and are even blaming them for the present housing crisis. The truth is that the lenders/banks are the real culprits.
The problems begin when the banks offered a teaser rate of say 8 or 9% to entice people into a mortgage and then two years later increase the interest rate to between 10 and 12 %, or even more. People were already struggling to pay say $800 per month for mortgage and then they found out that they had to pay $1200. In addition to this you have cost of living going up coupled with high gas prices. Many of these people did not have nay problem paying their mortgage because they were paying the same amount for rent anyway. The problems started with the 2-year adjustable rate increase.
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Now the banks are threatening to pull the plug on people with bad credit permanently. It is very difficult to get a mortgage now if your credit is below 700 score. In addition to that, you will have to come up with a 10-20% down payment. The property you are purchasing may have to be appraised at 10-20% above the purchase price. This will eliminate a large number of people from ever owning a home again. Some people will have to go back to renting for the rest of their lives. This will eliminate one of the basic principles of the American Dream from many people lives.
Unfortunately, people will be punished for the mistakes of the banks, while the banks are getting bail outs by the government. They will recoup easily only to return to the same predatory lending practices of the past. In the meantime homeowners will continue to lose their homes and no one is standing up for them now.
In many areas of the country you can't even get an apartment to rent if your credit is bad. Not everyone bad credit is due to negligence or carelessness. A lot of people lost their credit due to medical bills, divorce and other social causes. Some of these people were very responsible and did everything right prior. However, life has a lot of twist and turns.
People with bad credit should start the process of restoring their credit as soon as possible. There are legitimate ways to restore your credit and get a better credit score. Home ownership, despite the many problems, is still a viable way of securing your future and it should not be treated lightly.
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