Many American families are being forced into a foreclosure on their houses. Families are unable to pay their bills that are due to their mortgage lenders, so the lending institution decides to initiate a foreclosure on the property. When a foreclosure reaches completion, the family loses its right to the property and the lending institution assumes ownership of the house. The family or current resident is evicted as a result of not being able to make payments in the amounts that were agreed upon at the signing of the mortgage loan. As frightening as losing a house is, and considering the impact a foreclosure will have on a family’s financial future, I believe there are ways that a foreclosure epidemic can and could have been avoided.
When a prospective home purchaser is considering financing a home, they head to a mortgage lender and see how much of a loan that they will qualify to receive. The mortgage lender examines the prospective home purchaser’s finances through a credit check, financial audit, and analysis of current liabilities. After the financial examination is completed, the mortgage lender presents a loan offer to the recipient based on the person's credit check and current interest rates. This pre-approval process is straightforward but not without flaws.
I believe that mortgage lenders can do a part in eliminating the foreclosure problem. In consideration of the lender, I would insist that mortgage lenders thoroughly examine the recipient’s financial picture in order to determine if a person is able to save some income on a monthly basis, while also making timely mortgage payments. This will ensure that a monetary buffer is in place that the loan recipient can access when needed. The lender may want to be even more rigid and decide that a person will need to save a specific percentage of their mortgage payment per month. If the condition of saving money on a monthly basis is met, lenders will be able to lend more confidently and loan recipients will have a budding savings plan.
Prospective loan recipients should make sure to report all current liabilities to the mortgage lender during the pre-approval process. If the loan recipient presents all financial expenditures to the lender, an accurate assessment of the buyer's financial potential will be constructed. This thoroughness will ensure that the loan amount will match the borrower's payment and saving potential. Mortgage lenders may also want to exercise an option to monitor their lenders spending and saving habits.
Lenders that are pre-approving people for an amount that will stretch their monthly budget to its maximum, without accounting for the recipient's ability to save, are putting the mortgage in distress from the start. Mortgage lenders should make it a point to inform customers that they need to have an active savings plan in place to compliment their financial future. The savings plan will provide for a backup pool of cash that...