Boomerang Buyers: What to do if you see a Short Sale in your Rearview Mirror

By
Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI

 

Boomerang Buyers: What to do if you see a 
Short Sale in your Rearview Mirror
 

        You've probably seen me mention the term "Boomerang Buyer" in a few of my posts before.  This is a classification of potential Home Buyer that is contacting me more and more often for info, as of late.  As the housing downturn gets further and further in our rearview mirror, I believe that will happen even more often in the future.

     Because of the financial and real estate scenarios that gave birth to the "Boomerang Buyer" moniker, many of the questions I receive today surround the topic of Short Sales ... and their effect on Credit Scores.  That certainly was the case with one couple that I spoke to a short time ago.

     As this couple was marrying soon, they also wanted to know how one future spouse's credit history with a Short Sale would effect their Credit Scores as a couple ... and how it would effect them if they made Mortgage Application for a new home purchase soon.

     I pointed out that Credit Scores are based on each individual's unique Social Security Number and their respective histories.  Each individual has 3 Credit Scores specific to them and them alone. 

     In the specific scenario I refer to, it was the male that suffered the earlier Short Sale.  So moving forward, even after they marry, it would be only his Credit Scores that are impacted and reflect the past Short Sale. 

     The impact suffered on her Credit Scores because of the Short Sale most likely ranged from a 70 point drop in Scores to as much as 200 points.  Actually the "hit" taken by any individual's Scores depends on their previous Credit rating.  The higher their Credit Score prior to the Short Sale, the bigger the "hit" taken.

     If there were late payments previous to entering the Short Sale and the Mortgage on the former property was "settled for less than full balance owed" ... and reported that way to the Credit Bureaus by the Lender ... the impact or drop in Credit Scores because of the Short Sale were less impactful.

     It is practically impossible to fully predict the actual number of a Credit drop without knowledge of the Credit History and Credit Scores prior to the occurrence.  But typically, the mere reporting of a Short Sale will mean a "waiting period" for home loan financing for a minimum of one (1) year , but likely longer timelines will be in play.  

https://1609956119.secure-loancenter.com/FreeConsult.aspx     Most likely the minimum wait will be two (2) years, unless the circumstances leading to the Short Sale stemmed from major income or employment hardships.   (See my post regarding "FHA's "Back to Work - Extenuating Circumstances" Program for further information on that topic.)

     Fact is, "Boomerang Buyers" or those having suffered through financial hardships, need to seek out the guidance and assistance of a Mortgage Lender well in advance of when they hope to buy a home again.  Each client's financial scenario is (much like their Social Security Number) unique to them.  Individualized analyzation and guidance will be called for.

     Credit corrections, credit repair, and implementation of the advice I provide will move smoothly ... but slowly.  Ample time is needed to successfully move forward with a purchase.  So contact me now with your Mortgage questions and needs.  We'll get started immediately ... 


http://www.genemundt.com/ContactUs.aspx

     

     *  Hoping to Buy a Home once again?  Looking to Buy, Refinance, or Construct a home in the Lincoln-Way Area, Will County, or elsewhere in ChicagolandContact me today!  I'll put my 36 years of Mortgage experience and expertise hard to work on your behalf.
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Gene Mundt

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Topic:
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Chicago Area Real Estate BUZZ!
Realtors Converting Leads with Credit Repair
Buyer Information - What Buyers Need to Know in Today's Market
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Ambassador
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

 

Gene like you pointed out, it is very difficult predicting what impact a Short Sale will have on Credit Scores.  It all depends on the circumstances surrounding the Short Sale, and each one can be different.  The good thing is they have a waiting period before they can purchase again, so if they are serious of purchasing in the future again, the waiting period can be used correct their credit so they can be in a position to purchase after the waiting period.

Jan 16, 2014 02:44 AM #1
Rainmaker
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ReadySetLoan Condo Approval Team
ReadySetLoan Condo Team LLC - South Windsor, CT
The FHA/VA Condo Project Approval Specialists

It is remarkable that in this day-and-age that folks still don't understand the basics of credit scores, notably that they are tied to the individual's SSN.  I am an advocate for spending time in high school on practical items like this and balancing a checkbook, for example.

Jan 16, 2014 03:06 AM #2
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

"Boomerang buyers" (I never heard that term before, but I like it!) are becoming more & more prevalent as, like you said, the market problems of a few years ago become more distant - I'm glad you pointed out the importance of speaking with a lender well before planning to apply for a loan.  With proper planning & homework, people can obtain a new home as soon as the required waiting period is over.

Jan 16, 2014 03:57 AM #3
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Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Gene- it's so important for anyone that has had these financial hardships to seek guidance from a professional like you!  You can help them with a game plan. 

Jan 16, 2014 04:05 AM #4
Rainmaker
1,239,817
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

So right, George.  The waiting period can actually be a blessing in disguise.  Taking that time to repair Scores and Credit will help them save money in the long run ...

Eric:  I so agree.  If we educate the young ... esp. prior to going off to college or out on their own .. we'll see fewer issues with applicants later.  We'll save them lots of heartache ...

It's true, John ... we Lenders can be immensely helpful in the repair and improvement of Credit and Credit Scores.  We know which debt is best tackled first .. and which can wait a bit longer.  Timing can mean everything.  Glad you liked the term!!  I suspect you'll be seeing it often from now on ...

Kathy:  Exactly!  Perfect term for it too ... "game plan!"

Gene

Jan 16, 2014 04:41 AM #5
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Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

Yup, you can't know how hard of hit you will take.  Just start rebuilding.  Bad things happen to good people.

Jan 16, 2014 07:20 AM #6
Rainmaker
1,239,817
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Sad, but true Tammy.  I see it all the time.  Exactly why we try to get this info out ... and the help that people need to them quickly ...

Gene

Jan 16, 2014 07:52 AM #7
Rainmaker
2,276,647
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning Gene. Great topic, we will all see more and more of these buyers coming back into the marketplace. A lot of earl coaching goes a long way.

Jan 16, 2014 07:27 PM #8
Rainmaker
1,239,817
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Definitely true .. as they are making up a big part of the calls I'm receiving now.  Time has passed and the interest in homeownership is still there.  Good news for all ...

Gene

Jan 17, 2014 04:25 AM #9
Rainmaker
1,552,802
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

Great post about how things can take a turn quickly & make a short sale needed. It's a confusing subject & buyers should always consult with a professional that knows the ropes, ins & outs, etc. Just too much mis-information out there!

Jan 17, 2014 07:53 AM #10
Rainmaker
1,323,970
Nick T Pappas
Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Hun... - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

Gene, I thought it was a little curious that someone with a higher credit score (indicating they were doing things right and being responsible) would take a bigger hit on their credit score...unless I missed something.

Jan 20, 2014 07:34 AM #11
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Rainmaker
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