According to RE/MAX of Boulder Radio host, Duane Duggan, the market is experiencing a flood of Boomarang Buyers— home buyers who have a foreclosure, short sale, or bankruptcy on their record.
“I’ve had a lot of people ask me, ‘Now that I have this on my record, how long does it take to get started on buying a home again?’” says Duggan.
Trevor Bellows of Premier Lending, LLC encourages previously foreclosed upon home buyers to meet with a lender to set a plan to improve credit enough to purchase a house again in the future.
“The first thing we do is talk about the event they had in their life,” says Bellows, “It’s important that we find out exactly what happened.”
Because circumstances vary from case to case, some buyers will find themselves on a much shorter track to recovery than others. Some buyers, Bellows says, may believe they have experienced a foreclosure when in reality, it was a short close.
The difference between a foreclosure and a short sale affects the buyer’s ability to bounce back from an incident. In the case of a foreclosure, a person simply walks away from a home that he or she can no longer make payments on or that has depreciated below what the owner owes. A short sale, however, takes place when an owner opts to sell their home for less than what they owe in loans. Bellows notes that having a short sale on one’s record shows they attempted to make payments and may therefore be more highly considered for a new mortgage.
Typically, it takes 7 years before a home owner who has experienced a foreclosure, short sale, or bankruptcy can finance a home again, says Bellows; the acceptations being FHA loans, which require 3 years, and VA loans which require just 2. So how can you set yourself up to finance a home after experiencing one of these events?
“Credit is a recipe of duration and use,” Bellows explains. “It’s important to get credit after an event,” he says. Credit is earned through loans such as a car or student loan, and through credit cards that can be used regularly. “You should have 12 months of good history with a new credit line before you start looking to finance a home again,” says Bellows.
In addition to repairing credit, a down payment of at least 10% will help, though the standard 5% (3.5% for FHA) still applies to previously foreclosed upon buyers.
In August of last year, the FHA launched it’s Back to Work Extenuating Circumstances program. Bellows explains the program as an option to consider for people who have experienced a foreclosure, short sell, or bankruptcy due to circumstances beyond their control that lead to a 20% reduction of income that, in turn, led to one of these events, the FHA requires only 12 months before the home buyer can apply for a mortgage again.
FHA Back to Work Extenuating Circumstances applicants must have completed the counseling program and have had it completed for 30 days before applying for a new mortgage.
To start your foreclosure recovery plan, contact Jessica Shannahan of Premier Lending, LLC at 720.833.7964 or Trevor Bellows at 720.833.7965
Listen to the full interview on RE/MAX of Boulder Radio.