Boomerang Home Buyers Getting Back in the Saddle

The next eight years are poised to be big ones for real estate as over 7 million so-called boomerang buyers re-enter the American housing market.

Boomerang buyers is the moniker given to those who lost their homes during the foreclosure crisis that peaked in 2007 when the recession had a stronghold on our economy. Foreclosures and short sales were rampant, affecting millions of homeowners across the country, forcing many out of their houses and back into the rental market.

It takes about seven years to recuperate from a foreclosure, rebuilding credit scores to a level that allows former homeowners to once again qualify for a mortgage. Those who had a solid credit history prior to their short sale or foreclosure will bounce back more quickly than someone with a history of poor credit. Over a half million will reach this seven-year mark in 2015, putting them in a position to once again possibly own a home. In 2016, one million people will qualify, peaking in 2018 at 1.3 million and slowly dwindling off up to 2022.

Boomerang or rebound buyers are primarily from Generation X or the Baby Boom era and many, though welcoming the opportunity to once again own a home, are wary of making the same financial mistakes that resulted in their losing their homes in the first place.

Below are 6 important tips for rebound buyers to ensure their next home purchase is a successful one.

  1. Wait it out
    Be sure you know what the waiting period is for your particular situation, as guidelines vary by lender. The clock officially starts ticking on the ‘time out’ period once the foreclosure is completed. Attempting to get back in the home ownership saddle sooner could result in paying significantly higher interest rates so it pays to wait it out.
  1. Repair your credit
    If your only credit ding was the foreclosure of your home, that will be easier to repair than someone who has a number of financial issues or a lengthy history of poor credit. To restore your good standing, there are two key fixes to making you more appealing to lenders: pay your bills in a timely manner and reduce your debt to income ratio.
  1. Have a plan
    Prepare in advance and be sure all of the things that could stand in the way of obtaining a mortgage are removed. Consult both financial and real estate professionals and ask their advice.
  1. Consult CAIVRS
    If your loan was backed by the FHA or US Department of Veteran’s Affairs, ask your new lender to check the Credit Alert Verification Reporting System (CAIVRS). This government-run database keeps a log of government paid loan debt. If the US government backed the repayment of your previous loan, you must repay them before you’re eligible for a new mortgage.
  1. Have your down payment
    Gone are the days of buying a home with little to no money down. A minimum of 3.5 percent of the purchase price is expected, or 20 percent for a confirming loan without mortgage insurance (PMI).
  1. Get preapproved for a loan
    Get your loan approved before you hit open houses or begin working with a realtor. The residential housing market is on the upswing and multiple offers are expected in many areas. Having your funds ready shows you are a serious buyer and will help you know what you can afford.

By following these guidelines, millions of boomerang buyers affected by the recession could once again successfully enter the housing market over the next eight years.

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