With analysts giving statistics that the peak of the foreclosure era is in our rear view mirror now, a new set of home buyers are coming back.
Boomerang buyers: Buyers who lost a home to foreclosure during the housing apocalypse are safely trying to re-enter the buying market. This time around, however may not be as clean cut for securing a mortgage.
During the Real Estate craze several years ago Mortgage companies had a plethora of buying options which didn’t mandate a 20% or more down payment to secure the loan. Today’s market and issuance of new Mortgage requirements are making a substantial down payment almost inevitable. That is not to say you cannot secure a mortgage with $0 as a down payment, however it does suggest your buying credit and history needs to be mostly clean.
Real Estate professionals agree these buyers are essential in developing a sustainable Real Estate market. What do we see that draws this conclusion?
RealtyTrac notes (via North Carolina State University) that:
From January 2007 to December 2011 there were more than four million completed foreclosures and more than 8.2 million foreclosure starts …
That is a huge number of folks who had their dreams of Home Ownership slip out of their hands. the majority still have those dreams that will eventually drive them back into the housing market. Another data linking this possible influx of Boomerang Buyers to the market is the stats reported this past year by CoreLogic:
Approximately 1.4 million homes, or 3.4 percent of all homes with a mortgage, were in the national foreclosure inventory as of May 2012 compared to 1.5 million, or 3.5 percent, in May 2011 and 1.4 million, or 3.4 percent, in April 2012. The foreclosure inventory is the share of all mortgaged homes in some stage of the foreclosure process.
How are they able to get back in the Home Ownership picture with a foreclosure on their record? Well, some information out there is a bit misleading. Some reports tell a buyer who has had a foreclosure must wait a minimum of 7 years in order to be able to secure a new loan. Not totally true.
Here is the information I use when dealing with clients who have a foreclosure on record.
The wait times for qualifying for a loan can vary depending on the former home owners’ circumstances. Typically, the wait times following a short sale or foreclosure are as follows:
- Seven-year wait for home owners with a previous foreclosure before they can qualify for a new mortgage through mortgage giants Fannie Mae and Freddie Mac. If the foreclosure was included in a bankruptcy, the borrower has to wait only four years.
- Two-year wait for home owners who underwent a short sale before they’re eligible for another Freddie Mac and Fannie Mae loan.
- Three-year wait for home owners seeking a Federal Housing Administration loan after a foreclosure or short sale. Some home owners who underwent a foreclosure because of at least a 20 percent cut in their pay may be able to qualify for a new mortgage after just a year through FHA’s Back to Work program.
As you can see form the data above, we are quickly moving into that magical time of 4 years. The height of the foreclosure nationwide was in 2010. So keep in mind when preparing your offers for buying your next home, you may have a new kind of competition. Talk to your Real Estate agent today to stay up on trends to consider when negotiating offers or contracts.