Many homeowners in Miami endured foreclosure since the housing bubble burst in 2007. Now however, a good number of these people are coming back to the housing market, generating the new term “boomerang buyers.” While it’s hard to estimate just how many buyers fall into this new category, real estate brokers, home builders and mortgage personnel agree that a significant number of new buyers suffered foreclosure.
Some of these buyers are only three years removed from losing their homes. Even this short period permits buyers to be eligible for FHA mortgage loans. Those homeowners who avoided foreclosure by completing short sales on their houses have the same three-year waiting period for FHA loans.
The CEO of a national home builder, speaking about these boomerang buyers, notes that more Americans are “coming out of the penalty box” they’ve been occupying since the housing crash. Real estate agents and mortgage personnel are also becoming experts in mortgage eligibility rules to better help these people buy homes.
Some estimates put the number of potential eligible buyers meeting the FHA time constraint at almost 730,000 families, a large increase over the estimated 285,000 in 2011. Unfortunately, Fannie Mae and Freddie Mac have longer waiting periods, forcing potential buyers to wait up to seven years after a short sale or foreclosure.
Boomerang buyers, however, must be aware that the mortgage industry still offers challenges to applicants. Just becoming eligible for financing does not mean buyers will receive the funds they need. Those with credit scores below 680, spotty employment records or not meeting other strict underwriting guidelines, implemented after the housing crash, will still have difficulty getting approved for mortgages.
Do you think it’s time for mortgage lenders to loosen strict credit score and approval standards a bit to help jumpstart the housing market? Should Fannie Mae and Freddie Mac consider reducing the time period for borrower eligibility?
Source: The Wall Street Journal, “Buyers Back After Foreclosure,” Conor Dougherty and Dawn Wotapka, Oct. 14, 2012