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How the subprime woes affect you

The impact of rising defaults is already being felt on Wall Street. Here's the impact on home buyers and sellers.

By Gerri Willis, CNN

NEW YORK ( -- Stock markets have been struggling because of worries about lenders who underwrite mortgages for people with bad credit. Some two dozen companies have been affected.

Worse, the crisis is also hitting better known banks and Wall Street brokerages that invested in these loans. The reverberations are being felt from Tokoyo to London.

A recent study predicted that one in five subprime mortgages issued in 2005-2006 will fail.

For home buyers...

For this consumer, this means, there will probably be a tightening of credit.

It will be harder for you to get a mortgage, if you have less - than - perfect credit.

And if you do, the terms won't be as favorable (think higher rates and more money down).

In addition, It could be harder to get an adjustable rate mortgage (ARM) because it can be seen as risky.

For home sellers...

If you're trying to sell your home, there will be fewer buyers out there - and those buyers may have less to spend because they have less favorable mortgages. All that could lead to a lower selling price for your home.

The Mortgage Bankers Association predicts that housing won't even regain its footing until near the end of 2007.

And there is an impact beyond the housing market. Remember, people don't just borrow to buy homes. They take out home equity loans to pay for college education for their kids. Or home repairs, or to buy a new car.

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