Real Estate Investment During Credit Crunch

The real estate showdown has made investors very speculative about real estate investment. The “blame game” carried on for sometime and has not died down as yet. It was a chain of reactions that led to the downfall of the real estate market in the country. No single real estate operator can be blamed for the crisis. The onus lies on all real estate market participants. The borrowers can’t be spared. There were many borrowers who had knowingly inflated their property value with the aim of getting a bigger loan or for qualifying for a mortgage, if they were not eligible.

The real estate market witnessed different categories of mortgage loans making its way into the market. For e.g. the Alt-A mortgage loans were a favorite during 2006-2007. A series of miscalculations related to mortgage backed securities, credit default swaps etc. led to the financial crisis.

Big names like Lehman Brothers, AIG, Merrill Lynch, Bear Stearns either declared bankruptcy or were on the verge of declaring bankruptcy. The crux of the matter is if you are planning to invest your money in the real estate market, just hang around for some more time and let the real estate market look up. Real estate investment following credit crunch means you will be investing in property that may have negative equity. Undoubtedly, equity in the property will grow over the years but the time it will take can’t be predicted. The real estate market catalyzed the economic slowdown

With President Obama’s Mortgage Relief Program, about 4 million to 5 million homeowners can save their property from foreclosure. Mortgage loan modification is another plan that has been introduced recently. In loan modification, also known as loan workout, a borrower can request the lender to change the terms and conditions of the existing mortgage.

Moral of the story It is your hard earned money and before you opt for any real estate investment, it is better to do your bit of homework. Be prepared for a worst case scenario. In the event you have to face the worst case scenario, work out an alternative plan. However, stay away from the real estate brokers who take advantage of innocent and ignorant borrowers.