“Boomerang” buyers are those who had lost their eligibility to own a home because of a foreclosure or short sale, but are once again eligible to enter the market. At the start of the housing bust and through 2013, there were more than 5.3 million homeowners that lost their home because they were unable to afford their mortgages. Fortunately, many of these buyers have sat on the sidelines long enough and can once again qualify for an FHA loan.
According to CoreLogic, at least 3.4 million of the U.S households that fell victim to the housing bust have waited the mandatory period and are considering coming back to market. You can expect to see a number of these boomerang buyers searching for homes your area and although they are eligible for a home loan, they still may not qualify for one. This means that they will be looking for ways to get their financials in order before jumping back into homeownership.
Here are 7 tips to share with these hopeful buyers that will tighten up their wallet and make the dream of being homeowners a reality again!
1. Keep up with Your Own Credit
Checking their credit score will not harm their score, so they should be using sites like CreditKarma.com and AunnualCreditReport.com to pull their credit report. It can’t be stressed enough that they review it closely for errors, because whether it’s bankruptcy, foreclosure or short sale, it is common to find misreporting. If any misreporting is found, they should gather the proper documentation and contact all three credit bureaus (Experian, Equifax and Transunion) to request its removal.
2. Talk to the Local Mortgage Expert
Choosing the right loan officer is a critical part of the battle back to homeownership. Since this is the most important decision they’ll make, be sure that they do their research and find someone that will help rebuild their credit and walk them through the underwriting process. Make a recommendation for a great mortgage professional you’ve worked with in the past, and they may return the favor by sending leads your way later.
3. Always Get Pre-Approved
Although their loan officer should mention it, make sure that your client gets fully pre-approved before applying for a loan. They should have credit documents, including income, assets, identification, credit report and documentation on the derogatory credit ready to give to the underwriter. Forewarn them that there will be a lot of paperwork involved, but it’s normal in today’s tightly bound mortgage market.
4. Have the Down Payment Ready
Having a significant down payment is a sign of good faith to the mortgage lender, who is essentially their gatekeeper to homeownership. Underwriters are looking for these types of things, and it makes your clients stand out from all the other applicants. Tell them to take advantage of the Homes.com mortgage calculator, as it will give them a better idea of how much they need to save.
5. Check CAIVRS
The CAIVRS is a government-run database that tracks delinquent federal debt, and if your boomerang clients previously had an FHA or VA mortgage loan, they may be red flagged in the system. If there is any hope of obtaining another government-backed loan, they need to satisfy this debt as early into the process as possible. Have them contact their lender, so that he/she can make sure that they are in the clear.
6. Buy Responsibly
Boomerang buyers need to stay away from homes that are priced at the top end of their budget. Underwriting guidelines for these clients are usually more conservative, which means they have an allowable debt-to-income ratio that is lower than normal buyers. Although they may be looking for the home of their dreams, explain that they need to come up with a comfortable price range and stick to it during their home search.
7. It Takes Time
It can be a long and curvy road back to homeownership for boomerang buyers. Remind them that this process will require a little more time and a lot more paperwork than the first time around. The good news is that if they choose the right loan officer to work with, they should be able to cut down the paperwork and get them back to living the American Dream!
Want to position yourself as a great resource for boomerang buyers? The Homes.com Mortgage Checklist highlights what areas lenders consider during the loan process and will serve as a good starting point for these potential buyers. Download this checklist and add your contact information to it – that way your clients will remember that you helped make their second shot at homeownership count! For more articles like this one, check out Homes.com’s featured mortgage expert, Shashank Shekhar.