Boomerang Buyers are Back After Foreclosure Means New Life for Homeowners
A boomerang buyer are those reentering the housing market after a foreclosure or short sale. We are seeing a lot of people back on the market after suffering a short sale just a few years ago. Many of these people are now qualifying for an FHA (Federal Housing Administration) loan. According to John Burns Real Estate Consulting, buyers who lost a home due to foreclosure or a short sale between 2007 and 2013 are projected to make up about 10% of all US home sales over the last year. The Washington DC area is among one of those regions expected to have higher levels of activity with boomerang buyers. In 2015 and 2016, these homebuyers will increase as more former owners become eligible for new loans.
How quickly someone can bounce back from a foreclosure or short sale depends on the reason they suffered financial hardship in the first place. A distressed borrower who had good credit history before they lost a job could be more likely to qualify for a new mortgage than someone who may have suffered because of bad credit and continues to demonstrate poor financial habits.
Hardships can include a death, medical bills, job loss or relocation, all of which may have nothing to do with credit history. Many of these boomerang buyers are being even more cautious as they don't want to get in over their heads. These buyers are sticking to a budget that they can comfortably afford rather then reaching too far beyond the means of a reasonable monthly payment.
FHA loans can be easier to obtain for home buyers after a short sale. In some cases, borrows may not even have to wait at all if they've never had late payments on their mortgage. However, borrowers in default or had delinquent payments may have to wait up to three years in order to qualify for an FHA loan.
VA loans, guaranteed by the Department of Veterans Affairs, offers the most lenient of rules with just a two-year waiting. And no down payment is required.
Conventional loans require a two-year waiting period after a short sale as long as borrowers can make a 20% down payment. That weight is extended to four years with a 10% down payment and seven years with the 5% down payment. If a homeowner lost their home due to a foreclosure and typically this means they were in default on the mortgage they must wait seven years in order to qualify for a new conventional loan.
Again, extenuating circumstances could change all of these figures and it really depends on the borrower, their credit history and the reason for their financial distress. Many loans are dependent on a case-by-case basis. The Back to Work loan program that was launched in 2013 offers options for borrowers that lost their home due to the housing crisis and recession but the program requires housing counseling before a new loan can be approved.
If you're interested in learning about your options on borrowing again after a foreclosure or short sale feel free to give me a call at any time. I would be happy to ask some questions and find out which program might work best for you. I work specifically in the Columbus area, Gahanna, Lewis Center and surrounding towns and cities in Franklin County OH.