For any one older than 7 years old, you probably will remember 2008. That was the year the American economy almost drove itself off a cliff. How anyone survived that crash is something historians will debate, and citizens will be paying for, for decades. Fortunately, or unfortunately depending on your take, the credit market has a memory span of about 7 years. Personal credit scores are beginning to forget that year altogether. Like a bender in Vegas, that long night will be a forgotten footnote with only the errant tattoo or phone photo to show for it.
The 7 Year Itch
A foreclosure (or damage to credit from something like a short-sale) often impacts credit for seven years or in some cases longer. People whose homes were sold short or foreclosed in 2008 at the depths of the crisis are going to be crossing the 7 year mark this year, and with a bit of luck and good planning, might be in a position to think about home ownership.
In many cases, it may take a few more years to qualify for a mortgage, but getting approved for a mortgage after seven years or earlier in some cases, can be done if people are willing to put in the effort. And this is the year that those people who put in the effort will be arriving on the market. According to RealtyTrac, about 7.3 million boomerang buyers will be crashing the U.S. housing market party.
However, all 7.3 million won’t be showing up at the same time (that would just kill the vibe). RealtyTrac estimates that only about 500,000 people with a foreclosure from this time will be in a position to be approved for a mortgage this year. A further 1 million former foreclosure victims will be eligible next year, and about 1.3 million by 2018 before it starts to drop off over the course of the next 5 years.
Many of the applicants will have to deal with their housing to debt ratio, but those that find themselves on the right side of the equation should come out with an FHA mortgage with the assistance of a few housing initiatives. The FHA has offered a Back to Work loan program since 2013 for people who lost their homes because of the housing crisis. VA loans — guaranteed by the Department of Veterans Affairs — will find some space here as well, with more lenient rules, and in some cases no down payment requirements.
Loan Officers and housing professionals that get involved with boomerang buyers might find themselves faced with clients that have learned the hard way what it takes to be successful home owners, and a real can-do attitude. Getting a handle on matching their expectations and offering the types of loans for which they qualify, might make them an attractive group in the coming years.
Are you getting Boomerang Buyers in your pipeline?
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