A method that was commonly used by banks and lenders alike was lowering the monthly mortgage payments, which therefore puts less stress on the buyer to meet monthly demands(Robertson, 2012). In addition, there was also the issue of limited documentation; documentation in the past included W-2's and employment information and benefits. With reliable documentation, banks could accurately make a decision on whether or not the borrower had the means to pay off the loan. Credit score was also a major key in the crash of 2007. Lenders looked at the credit score, and if the credit score passed a certain threshold, then the applicant was able to receive the said loan for the mortgage on the house. This enables many first-time homebuyers to purchase their respective house even if the largest loan prior was a credit card(Robertson, 2012). Lastly, low interest rates helped fuel the housing bubble. Low interest rates for mortgages encouraged many people to buy homes and then refinance them. This process required large sums of money in the process. Eventually, these buyers had built up enough equity in their own home, but had little money left after paying everyday expenses. The people who took loans out no longer had money that could support their families and house, and before long many of these borrowers now had loan amounts that far exceeded the true value of their home. .
Nearing the year 2007, the housing prices began to heavily fluctuate, and many investors were worried. The proprietors of new homes were looking to use the housing bubble as a way to invest and make money off real estate, a plausible method to make thousands a couple years prior. Because of low interest rates and zero down financing, the housing bubble was essentially fueled by credit, without many of the new homeowners and investors having a solid income and a finite method to pay off the mortgage of their new houses. Eventually when the housing crisis hit and housing prices began to decrease drastically, many investors foreclosed their property and thus suffered a huge blow to their credit score.
