‘Boomerang’ buyers get second chance
NEW YORK – June 17, 2014 – About 7.2 million homes have been lost to foreclosure or short sale since the housing crash began, according to housing data from Black Knight Financial Services. That has forced millions of former homeowners into renting, as they work to rebuild their credit.
But a government program launched last summer by the Federal Housing Administration (FHA) is helping these new renters step back into homeownership in as little as one year after a foreclosure or short sale. The FHA's Back to Work program allows them to qualify for low interest rates with a minimum of a 3.5 percent down payment. Applicants must show that the main culprit behind losing their home was that they lost at least 20 percent of their household income for at least six months. They also must show they've worked to repair their credit for at least a year.
Lenders report an uptick in boomerang buyers coming in to explore financing opportunities for a home purchase.
"We see a lot of boomerang buyers," says Matt Weaver, a lender with PMAC Lending Services in Florida. "I'd say about 20 percent of my current clientele has either suffered a short sale or a foreclosure in the past and are now re-buying back into the marketplace."
But while opportunities to apply for a home loan are increasing, some are hesitant to step back in, housing analysts say.
"Based on the fact that the homeownership rate isn't rising again and demand for single-family rentals is historically high, the comeback buyer is not a significant phenomenon in the market," says Mark Fleming, chief economist at CoreLogic. "Given the duration of the recovery, it's likely that many of the initially foreclosed borrowers have repaired their credit and are now creditworthy, but the scale at which they will enter the market is not sufficient to significantly influence demand."
Source: "'Boomerang' Homebuyers Getting a Boost From Uncle Sam," CNBC (June 13, 2014)© Copyright 2014 INFORMATION, INC. Bethesda, MD (301) 215-4688