Boomerang Buyers – Welcome Home!

boomerangAs was written so eloquently by John Rebchook of Inside Real Estate News in his June 20, 2013 article Boomerang Buyers return to market , “Tens of thousands of home owners who lost their homes in the Denver area during the Great Recession may now be qualified to once again buy a home.

“’Depending on the loan program the formerly distressed home owner had, the circumstances of the default and efforts made to improve their credit scores, they may be able to qualify for a new mortgage in one year*,’” said Jim Spray, a veteran lender… ‘“A large number of industry professionals, including me, are calling these Boomerang Buyers…’”

Homeowners are returning to the housing market following a short sale, foreclosure or deed-in-lieu of foreclosure. This phenomenon of rebound or boomerang buyers is not without critics, but they enjoy the strong support of Housing and Urban Development Secretary Shaun Donovan, who was quoted in a November 2012 Denver Post article titled FHA providing buying opportunities to those who defaulted on homes, “the FHA has tightened its standards significantly but must still lend to those who wouldn’t otherwise qualify for a mortgage. It’s crucial for families to ‘show that they are responsible, that they have worked hard to reestablish their credit.’”

Simply becoming eligible based on the mandatory mortgage market time-out does not by itself mean that buyers will necessarily qualify to be approved for a mortgage. Lenders require borrowers to have strong FICO®  scores and qualify with sufficient acceptable income. An excellent tool to help determine your FICO score range is the FICO® Score Estimator. If it is not a FICO Score, the chances are the score is what I call a FAKO Score.

The Chart Of Facts: How long after bankruptcy or foreclosure must you wait to get a mortgage?

FACT: One can qualify for a new home purchase loan three years after a short sale, foreclosure or deed-in-lieu of foreclosure. Such requires a proactive approach by the borrower.

FACT: One can qualify for a new home purchase loan just two years after a Chapter 7 Discharge. Again, this requires a proactive approach by the borrower.

The number of potential Boomerang Buyers, just in Colorado is substantial. There were 42,692 foreclosure filings in the state in 2010 and 27,113 Chapter 7 Bankruptcy cases filed.  Giving people a second chance — even a third chance — is as deeply ingrained in the American psyche as is owning a home, the American Dream. Welcome home Boomerang Buyers!

 Boomerang Buyers Are Expected To Boost The Economy In 2014

According to a poll of LoanSafe.org and AfterForeclosure.com’s members:

  • 79 percent of those who lost their homes are interested in buying again.
  • 41 percent have incomes higher than when they first purchased.
  • 63 percent report that their other debt obligations are lower (30 percent said “significantly lower”).
  • 46 percent report the desire to purchase in a lower price range, and 29 percent report wishing to purchase in the same price range.

According to an article in Bloomberg Businessweek, it is possible that rental payment reporting may become a part of certain credit reports; time will tell is this information is accepted by the mortgage giants Fannie Mae and Freddie Mac.

Update: As reported in Distress Servicing on July 25, 2016 under the headline – Boomerang Buyers Bounce Back

It was also reported that boomerang buyers are, on average, four times more likely to finance with FHA loans than traditional non-distressed, owner-occupied repeat buyers. FHA loans are, as a general rule, easier to obtain than conventional loans for cash-strapped borrowers with past foreclosures in their credit history because FHA guidelines allow potential borrowers to apply for a loan three years after the foreclosure sale date with a minimum 3.5 percent down and a credit score of at least 580.” Click here for the full article.

Image attribution

Financially Speaking™  James Spray, MLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | Updated August 1, 2016

 Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

*Correction from two years to one year made on 8/20/2013.

One comment on “Boomerang Buyers – Welcome Home!

  1. James Spray says:

    According to a poll of LoanSafe.org and AfterForeclosure.com’s members:
    •79 percent of those who lost their homes are interested in buying again.
    •41 percent have incomes higher than when they first purchased.
    •63 percent report that their other debt obligations are lower (30 percent said “significantly lower”).
    •46 percent report the desire to purchase in a lower price range, and 29 percent report wishing to purchase in the same price range.
    http://bit.ly/1fN4eBC

    Like

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