As the most trusted source for real estate information, the NATIONAL ASSOCIATION OF

REALTORS® encourages home buyers to shop for the mortgage that is best for them.


NAR urges home buyers to deal with reputable lenders and seek professional help from agencies like the Better Business Bureau and certified housing counselors to identify lenders of good standing before choosing a lender. Other sources of information are local community housing groups, consumer advisory organizations and REALTORS®.


NAR warns consumers against predatory “toxic” loans that can poison the home buying process

and trap unsuspecting borrowers into years of financial hardship.


Subprime lending has grown rapidly in recent years, hurting vulnerable parts of our



Over the past few years, the number of mortgage products introduced to the market exploded.

Many included no-downpayment features, which were a boon to first-time buyers, who are often

challenged to come up with sufficient funds for downpayment and closing costs. Some of these

loans were made to buyers with less-than-perfect credit. Known as subprime loans, these

mortgages have higher interest rates and higher costs, such as prepayment penalties.

The hybrid adjustable-rate mortgage (ARM) has been one very popular, widely available mortgage product. Hybrid ARMs have an initial period with a lower interest rate followed by significant increases over the remainder of the loan. The hefty payment increase, often called payment shock, caught many buyers by surprise over the last year, and a number of homes went into default and eventually foreclosure.


As a result, foreclosure activity in 2007 was up 75 percent over the previous year, according to

industry sources.


REALTORS® care as much about keeping families in their homes as they do about helping them find the home of their dreams.


As the first point of contact in the real estate transaction, REALTORS® are uniquely positioned to inform and guide consumers through the maze of financing alternatives to make sure a home buyer’s mortgage meets his or her financial needs.


REALTORS® help home buyers make what is often the biggest financial decision of their lives. A big part of that job is to help their clients find fair and affordable financing so they can protect their investment. REALTORS® believe that financial education is an important defense against abusive lending practices and unwise mortgage choices.


As part of the economic stimulus package passed in February 2008, Fannie Mae and Freddie Mac conforming and FHA loan limits were raised for this year. NAR research indicates that the increased FHA loan limits will help an additional 138,000 Americans achieve the dream of homeownership and will allow nearly 200,000 homeowners to refinance and potentially keep their homes. Increasing Fannie Mae’s and Freddie Mac’s conforming loan limits would result in as many as 500,000 refinanced loans and could help reduce foreclosures by as much as 210,000. In addition, over 300,000 additional home sales could be generated.


To help REALTORS® educate home buyers about today’s mortgage options, NAR has produced five brochures in its Understanding Today’s Mortgages series.


Three of the brochures, Specialty Mortgages: What are the Risks and Advantages?, Traditional

Mortgages: Understanding Your Options, and How to Avoid Predatory Lending were developed in partnership with the Center for Responsible Lending.


NAR partnered with the Center for Responsible Lending and NeighborWorks® America to produce Learn How to Avoid Foreclosure and Keep Your Home.


The brochure FHA Improvements Benefit You: FHA Insured Mortgages was created in partnership with the Federal Housing Administration of the U.S. Department of Housing and Urban Development.


All five brochures are available at www.REALTOR.org/subprime.


If they can afford it, buyers should choose a loan that amortizes, that is, one that pays down the original loan balance over time.


Over the past few years, a growing number of loan types allow the outstanding balance to grow

until it exceeds the value of the home, which amplifies the borrower’s risk and can significantly

increase the monthly mortgage payment after the initial period.


Shopping for a loan with the lowest monthly payment often is not in the consumer’s best interest.


Buyers should consult with a real estate professional such as a REALTOR® to make sure they

understand the risks associated with nontraditional and hybrid ARM loans and what may happen when the loan adjusts or converts at the end of the initial interest rate period.



Copyright ©2014 Space Coast Association of REALTORS, Inc.

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