“Boomerang buyers”—former home
owners who have gone through a short sale, foreclosure, or bankruptcy in
the past few years and are saving up for a down payment to purchase a
home again—are coming back. They're expected to flood markets in some of
the hardest hit areas for short sales and foreclosures in the coming
years. For example, boomerang buyers are predicted to account for nearly
one in every five home sales in the metro Phoenix area this year—double
the projected U.S. rate.
Rising rents and the desire to own again now that the economy is more
stable are driving many boomerang buyers to re-enter the market. They
also want to jump in before interest rates and home prices climb too
much higher.
But how soon they can jump back in will depend on the type of loan
they had as a previous home owner. For example, boomerang buyers who had
FHA loans may need to wait only three years if they can prove that a
hardship, such as job loss or death of a wage earner, led to their
foreclosure or short sale.
Borrowers have typically been required to wait five to seven years to
qualify for another loan, but mortgage giants have begun to change
their rules to allow home owners who underwent a foreclosure or short
sale to qualify sooner. Those who underwent a short sale will likely
qualify the soonest. However, not all lenders are participating, so
borrowers will need to shop around.
Freddie Mac’s wait time is usually four years following a short sale
or deed-in-lieu, and seven years after a foreclosure. Fannie Mae may
require a seven-year wait for a foreclosure, but only a two-year wait
following a short sale as long as the borrower can provide a 20 percent
down payment.
The following markets have the highest share of boomerang buyers, according to John Burns Real Estate Consulting:
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Riverside-San Bernardino, Calif.: 4.1% (percentage of all U.S. boomerang buyers in 2013)
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Los Angeles: 3.7%
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Phoenix: 3.6%
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Chicago: 2.5%
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Atlanta: 2.4%
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Las Vegas: 2.12%
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Washington, D.C.: 2.1%
Source: “New Wave of Buyers Ready to Hit the Real Estate Market,” The Examiner (July 15, 2013) and“Phoenix housing market sees 'boomerang buyers' sooner than expected,” The Arizona Republic (July 14, 2013)