What is a Boomerang Buyer?
As an aftermath of the last real estate bubble and financial crisis of 2007, hundreds of thousands of San Diego homeowners lost their jobs, savings money, and ultimately their homes. Fast forward to 2012 and 2013, and all of a sudden we are in a recovering San Diego Real Estate market. But what happened to those people who had a foreclosure on their San Diego home, or had to short sale their home in San Diego?
More than likely, they had to adjust their lifestyle and get a San Diego rental for 3-4 years while they build cash reserves, improve their credit scores, and as many months from their last financial blemish as they can. All this effort is in the hopes of a mortgage bank being able to issue them a mortgage. We like to call these consumers, “boomerang buyers”.
People who had a foreclosure, short sale, bankruptcy and want to buy a home again are called boomerang buyers. If you had a previous foreclosure or short sale on your financial record, but still want to buy a home as soon as you can, again, you are a “boomerang buyer”.
USA Today had a recent report about so-called “boomerang buyers” which has some startling statistics: Since 2007, more than 4.7 million homeowners are estimated to have lost homes to foreclosure or short sale. Seven in 10 will return to home ownership within eight years of their short sale or foreclosure. And some well informed new buyers will return even sooner.
With home prices still low and interest rates near record lows, today’s boomerang buyers might even find their next mortgage more affordable than their last one. Boomerang buyers are most prevalent in areas such as California and Arizona that were hardest hit by foreclosures, and their return is contributing to rebounds in those markets. Going forward, growing numbers of boomerang buyers could help offset the expected slackening in demand from investors as home prices rise, says Stan Humphries, economist for real estate website Zillow.
Even after the financial wreckage of a short sale or foreclosure, boomerang buyers are driven to own for the same reasons they bought before. They want their own place and they see it as a good investment.
How Do Boomerang Buyer Buy Homes?
Most of these boomerang buyers get loans from the Federal Housing Administration (FHA), which requires just 3.5 percent down payments versus 20 percent for many conventional loans. The problem is that FHA requires 3 years before they can apply for another home loan. Conventional Fannie Mae and Freddie Mac require 2 years minimum with 20% down payment and 4 years for 10% down payment.
This is great for those whose financial seasoning is done, but what about those that still have a little bit of time on their hands? Where will home prices be in another year or two? Will they even be able to afford that same house 2 years from now? We at Agent619.com have 1 strategy to get a BOOMERANG BUYER into an FHA loan, even after 1 day after their foreclosure or short sale. It’s easy but complicated, so perhaps we will blog about it on another day. But for now just ask us about it at: www.Agent619.com