Oct 31, 2012 in Homeowner . 0 Comment
Many families who lost their homes to foreclosure in recent years are coming back to the game. This large group of consumers, known as “boomerang buyers,” can now obtain loans and are moving quickly to reenter the housing market. On their second time around, these boomerang buyers are overcoming all emotional hurdles.
Dawn Wotapka, a reporter for the Wall Street Journal, debunked the popular myth that families that go through foreclosure never buy a house again. Rather, families that have had a home foreclosed on them are often eager to reenter the market, with a better understanding about how mortgage works and what responsibilities are required of them. “Definitely, you do not fall of a cliff when you lose your home to foreclosure,” Wotapka said.
The Waiting Period
Homeowners who’ve lost a home to foreclosure must usually wait for a while before they can apply for that loan again. For a loan from the Federal Housing Administration (FHA), homeowners have to wait 3 years before they can reapply for a mortgage. Fannie Mae and Freddie Mac require a much longer waiting period than the FHA— up to 7 years. Because the FHA has a shorter requirement, “it is the big game in town right now,” says Wotapka.
Eager boomerang buyers are reaching out to homebuilders. Families who know the exact date of their mortgage eligibility hire homebuilders to begin construction in anticipation of that date. Homebuilders also view the burgeoning boomerang market as a source of many potential jobs. Nearly 730,000 families who lost a home to foreclosure may soon be reentering the market.
You’re Eligible, but Do You Qualify?
Since the housing crash, mortgage requirements have become more rigorous, requiring applicants to provide exact sources of income, levels of debt, and credit history. The best opportunity is presented to families who have a strong credit score. Fortunately, a foreclosure, bankruptcy, or short sale isn’t a life sentence and can be repaired with diligence and patience. Repairing your credit score after receiving the blow from a foreclosure or short sale may take seven to ten years, but it is certainly achievable. Boomerang buyers should understand that even though they may be eligible for another loan, they will have to pass the lender’s requirements, which in the past three years have steadily grown more stringent.
Although banks took huge losses from the thousands of families who went through foreclosure, they are eager to get qualified individuals back into the housing market. “Housing is a big part of our economy, and this is a large number of consumers who if we can get back, we want them back in the game. But the rules this time around are very different. It’s not the, ‘you breathe, you get a mortgage’ anymore,” Wotapka said.