I have been asked a variety of things about this economic bailout package and I do have my opinions about it. Yet, I have to think of everyone, not just myself. With an eye on the housing market, you should be thinking several things about when it comes to this bailout.

What Is It?

The $700 billion worth of money being put into the current credit crisis has roots in trouble for some people, but to mean, it looks like it could be one of the better choices.

Here’s why.

By putting more security into banks, everyone benefits.

The current mortgage industry is highly tight. Unless you get an FHA loan (which I highly recommend anyway) you are likely to pay much more for a home in terms of down payment and the amount of credit you need to qualify. Yet, these banks, even the ones with the financially sound bottom line are scared and they just are not lending out money to those homeowners that would be a good risk.

The problem trickles down to every one of us.

• Banks do not lend enough money out
• Banks lose money because they simply haven’t lent out enough of it
• Home buyers want to buy homes but have to wait until they have 20 percent down payment
• The houses on the market due to the foreclosure mess sit there, causing all sorts of crime issues and a drop in the local area’s housing prices
• Housing values fall, meaning more people can no longer sell their home as they have upside down mortgages
• The housing market cannot get better: there is just so many variables in this light.

The solution is to shore up the banks and encourage them to keep lending, but only to lend to those who are good investments. I am not saying they should require a down payment of 20 percent (this is just too much for new homeowners currently.) Instead, they should be willing to look at job history, credit scores and other factors.

Let me also say that subprime loans are no good and no, I do not believe that banks in these positions should be given a free handout. I’m especially interested in them paying a sizable amount of interest on these loans from the bailout. Their top execs should not get any of it, of course.

Yet, as someone that knows the housing market needs to heal so the country can heal, the bottom line is clear: encourage lenders to lend.

What You Can Do Now

The good news is that you do not have to stay a victim in this situation. The FHA has home loan programs that can help those who are in need to get the home loan they need. This is not a subprime trap and most importantly you are getting into a good loan. 

FHA loans are the best that I can recommend right now. Unless banks start lending again, it will be hard to get loans from other traditional mortgage lenders. The good news is that the FHA loans available are at good rates.

Tags: 700 billion, FHA Loans, Foreclosure, housing market

This entry was posted on Tuesday, October 21st, 2008 at 6:51 am and is filed under Credit. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.