Tips to consider when re-entering the housing market as a boomerang buyer
Why it’s time to consider returning to homeownership after foreclosure.
Over 7 million families lost their homes to foreclosure between 2007 and 2014 during the Great Recession. An additional 2.3 million sold their homes via short sale, or selling for less that was owed. Both of these actions caused financial and emotional upheaval to families. Up to 7 years later, many of these families are ready to become homeowners again. They are being called boomerang buyers because they are coming back to the housing market. Here are some things to consider before re-entering the housing market to become a homeowner once again.
By the numbers:
7 years – The amount of time before a foreclosure stops being reported on your credit report. Both Fannie Mae and Freddie Mac require the 7 year waiting period after a foreclosure. More than 550,000 former homeowners are reaching this milestone and may be ready to own a home again. Many consumers think they must wait for this before they can qualify for a home mortgage again.
3 years – The amount of time FHA/HUD will consider granting a new mortgage to a borrower as long as their credit has been reestablished. If there were extenuating circumstances, the wait time may be shorter.
2 years – both Fannie Mae and Freddie Mac will consider granting a new mortgage if your home was sold via short sale or deed in lieu of foreclosure and foreclosure was avoided.
Take time to evaluate your situation before starting the home buying process. Check your credit report and get your score from www.annualcreditreport.com as most mortgage lenders require a minimum score of 640. If your credit score isn’t at this minimum, take steps to clear up any outstanding issues that are still open. It may take some time and patience at this stage of the process. Pay down or pay off any credit card debt and don’t open any new credit. Make sure you pay all of your bills on time to build a better credit score.
Save, save, save for your down payment and closing costs!
Michigan State University Extension has released a new toolkit for homeowners who are experiencing or have previously experienced foreclosure. This toolkit will equip these individuals and families with tools to help them recover their financial stability, in the case that a recovery of their home is not possible. The toolkit available to download free at MIMoneyHealth.org.