The Boomerang Buyer!

What are “Boomerang Buyers”? Past homeonwers who lost a property during the housing crisis via foreclosure, short sale and/or bankruptcy – and are now ready to buy again.

The numbers are staggering!! Almost 7 million foreclosures and short sales in the last 6 years (source That’s certainly a huge pool of experienced homeowners who could potentially come back to the market.

There are penalty/waiting periods in place dictating when those previously affected can reapply for conventional financing. Since it’s been several years now since the peak of the crisis, many of these folks are reaching the end of their penalty period and may be eligible to qualify for a new mortgage.

The penalty periods have been a source of great confusion, as the wait varies among loan programs and lenders. The most important thing to remember is that the waiting period starts when the foreclosure or short sale is COMPLETED. In other words, when title to the property is actually transferred out of the homeowner’s name and into the name of the bank or new owner. It does NOT start when the homeowner stops making payments, or vacates the home, or receives a foreclosure notice, etc.

Here is some current guidance on waiting periods:

FHA & VA                                2 years from bankruptcy*

                                                   3 years from foreclosure or short sale

 FHA Back To Work**           1 year from bankruptcy, foreclosure, or short sale.

 Fannie/Freddie                     4 years from bankruptcy* or short sale

                                                   7 years from foreclosure

*bankruptcy above refers to Chapter 7. For Chapter 13 reorganizations, the waiting periods could be shorter depending on circumstances).
**FHA back to work is a special loan program for those who can prove “extenuating circumstances” outside of their control (such as layoff, illness, etc) resulted in the BK, foreclosure or short sale, and whose credit and income have since recovered.

It is estimated that about 10% of all buyers in 2014 will be “Boomerang Buyers”! (source Washington Post).

Bottom Line: There are a lot of potential buyers out there that want to come back to the market. The ability to do so will depend on their particular circumstances. It’s important to start the process early by getting PREQUALIFIED for financing. Getting a head start on the process will allow time to deal with any potential issues and deliver a ready buyer with a smoother path to the closing table!

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