Boomerang Buyers

April 16, 2015

Boomerang Buyers

Boomerang buyers are making a comeback and they are one of the reasons to cause

potential increase in the demand for the housing market. For some who may not be aware of, boomerang buyers are former home owners who lost their home due to a foreclosure or a short sale.

Back in 2007 during the years of the darkest financial crisis and Great Recession, there has been a massive increase of foreclosures and short sales. During the economic downfall in 2007, a lot of people had their income declined, ending with selling their home at a price less than the amount owed on the property.

With the economy picking up, this has put foreclosed homeowners in the position to be ready to buy homes again. While millennial buyers have caught the attention of the housing industry as the generation whose below-normal homeownership are changing the shape of the US real estate market. Boomerang buyers normally consist of Generation Xers or Baby Boomers.

It takes as little as three years for homeowners to recover from foreclosure. But it would take seven years conservatively for them to rebuild their credit score. More than half a million homeowners, among the 7.3 million who have been hit during the crisis, have lost their homes to foreclosure or short sale, are now past the seven year window. More waves of these potential boomerang buyers will be subject for eligibility over the next eight years.

Same guidelines still apply to both boomerang buyers and would-be buyers – such as a minimum credit score of between 620 or 640 for an FHA loan; down payment requirements and under 43 percent of debt-to income ratio.

Tips for boomerang buyers:

Waiting periods – this is the common penalty for boomerang buyers. The Federal Housing Administration or FHA has set out guidelines of a 3-year wait to obtain a new FHA loan. However, waiting period varies among lenders.

Repair credit – foreclosure could perhaps, the only credit impairment boomerang buyers may have. They can repair their credit faster than other buyers whose credit history contains other issues. Regardless, both buyers must get their credit rating in order by settling old accounts and bank judgments. A foreclosure stays on a credit report for 7 years which will give negative impact, however this will soon fade over time. If you are able to pay other bills on time, this could help as history of paying on time can help.

Check CAIVRS – CAIVRS otherwise known as the Credit Alert Verification Report System is a system that is maintained by the federal government. It is a database of government-guaranteed loan delinquencies. Ask an authorized lender to check if you are listed, otherwise you will be ineligible for a new mortgage until you repay the government the claim amount that was paid.

Loan Preapproval – Check whether you have been preapproved for a loan before you go out there and visit homes for sale. Otherwise, it will be a waste of time if in case, they are ineligible for one.

Down payment – Previous homeowners when they first bought their last house didn’t have to make a down payment. Nowadays, a down payment of 3.5 percent of the purchase price is required before buying a house.

Make a plan – Some boomerang buyers seem to think they are ready for buying a new house even when sometimes they still have issues that needs to be addressed. It is best to start early as it might take a year or two before you become eligible.

Undergoing foreclosure or short sale could be tremendously stressing. After waiting out certain periods of time, this year has become an opportunity for previous homeowners to finally be able to get back on track and buy a home again. It is imperative to plan ahead and consult authorized lenders/ mortgage advisers to make sure that you are eligible for a mortgage application.

These days, real estate agents and brokers are not ignoring rebound or boomerang buyers. This is because, if you have been through a foreclosure, the motivation for buying again is there. You have been through the feeling and if you want to buy a house again, you will do whatever it takes. They are more serious with buying a home than ever.

Sources:

http://www.bankrate.com/finance/mortgages/tips-boomerang-buyers-homes-1.aspx

http://realtormag.realtor.org/daily-news/2015/03/31/dont-ignore-boomerang-buyers

http://money.cnn.com/2015/01/27/real_estate/boomerang-homebuyers-foreclosed-return/