1) 9/11/2011 Terrorist attack: Following the 9/11 attack, the government lowered federal lending rates. This made getting a loan really cheap.
2) Sub-Prime and Creative Lending: In the past, home-loans (mortgage) were given with a fixed interest rate. (Hypothetically 7% for 30 years), required a 20% down payment and also required the borrower have a loan to income ratio of about 40%. To buy a $500K house one needed a $100k down payment and an income of $6652/mo to cover $2661/monthly payment.
But greedy and creative lenders…
See how this gripping drama ends and check out my latest crib note: Housing Crisis – How to Create a Recession in 6 Easy Steps.