What two conditions commonly lead to home mortgage default?

The answer is rooted in the understanding of the factors that typically contribute to home mortgage defaults. When the loan amount exceeds the value of the home, this situation, known as being "underwater" on the mortgage, can significantly increase the likelihood of default. Homeowners in this position may feel financially trapped, especially if the property's market value continues to decline.

Furthermore, household economic hardship—such as job loss, decreased income, or unexpected expenses—can exacerbate the situation. When a homeowner is already dealing with an underwater mortgage, the added stress of economic challenges can lead to difficulties in making mortgage payments, ultimately resulting in default.

This combination of an unaffordable loan relative to the home's value and experiencing economic difficulties portrays a critical risk scenario that real estate professionals and lenders closely monitor when assessing the stability of mortgage agreements.