Boomerang buyers are people who lost their homes to foreclosure or short sale during the housing market crash and slow recovery (2007-2013) who are now re-entering the housing market. Some estimates project boomerang buyers to comprise about 10% of U.S. home purchases in 2014. (JBREC)
JBREC reports that of the 5.3 million households who lost their home, 889,000 have already repurchased a home. Further, it projects that 2.8 million will become homeowners again by 2021. It also states that FHA loans are the most common loans for boomerang buyers, whose credit is not yet repaired.
The overall consensus is that FHA loans are easier to acquire for people who have lost their homes to short sale. While the number of years boomerang buyers must wait for FHA loans depend on the size of their available down payment, those who endured foreclosure were technically in default of their loans, and likely must wait 7 years to qualify for a new direct loan. Those who were never late on payments before a short sale will have less time to wait than those who were late or defaulted.
It all depends on the potential borrower’s present credit rating. Those who had their credit in order before a foreclosure or short sale will be able to repair their credit faster than those who have messier credit histories outside of home ownership. Establishing and maintaining a history of paying other bills on time helps. MyFICO.com describes a foreclosure as just a single negative item on a credit history, “which does less damage in isolation than in conjunction with other late or missed payments.” Having a low debt-to-income ratio is also important for lenders to approve any loan.
The truth is that even those who were most strongly affected during the housing bubble burst are returning to the homeownership market. While time certainly plays a role in when potential borrowers can re-enter the fray, the eventuality is that everyone will get a second chance.