Foreclosure is an awkward word in the world of homeowners. It represents a lot of disappointment and unhappiness with the entire process, which normally is a great source of pride and joy. The last great recession left a lot of families in this position. Despite many having recovered their credit, there’s a notable reluctance to go back into the process of buying a home. Getting comfortable with the idea of a mortgage and homeownership is now a challenge for both a cautious buyer and their Realtor to tackle together.
Once Foreclosed, Twice Shy
Homeowners who have lost their homes to foreclosure may be reluctant to re-enter the market, but not necessarily because they are unable to. CoreLogic’s Senior Economist Kristine Yao took time to look through the statistics, and found that more than half of the homeowners who lost their home to foreclosure were financially capable of buying again. Of that number, less than half had gotten back into a home of their own:
More than half of the 3.1 million homeowners, 1.9 million to be exact, who lost their homes to foreclosure between 2007 and 2013 have passed the credit report seven-year rehabilitation mark. The return of these buyers to homeownership would, Yao says, have a significant impact on home sales but history tells us this isn’t the way it happens. Retrospective data shows a more gradual return rate, with less than half buying a home even 16 years after their foreclosure. Recent rates show “incremental volumes of 150,000 boomerang buyers returning per year, or 12,500 per month.” Of the 4.4 million owner-occupied foreclosures completed since 2000 less than one-quarter of the owners have returned to the market.
So How Can We Help?
Above all, Realtors should give good advice to prospective buyers. Credit scores can be improved, quality lenders can be recommended, and finding homes that are a good match for homeowners is important. While a past foreclosure can make someone feel hesitant to move forward with homeownership again, the right house can take that dream of owning again and make it a reality. Finding that house that matches overall needs and budget can help ease that fear and hesitation. Are you wanting to buy in the same neighborhood that you’re currently renting in? Do you want to make a move? With the tax savings of a mortgage, how will buying a home affect your overall budget? These are things that buyers should be considering.
Mortgage rates are in a good spot for people who need an easy entrance back into the housing market, staying consistently under 3.5% since the end of June. Even with their previous experiences, homeowners who have been foreclosed on can take advantage of this time to get the house they want and reignite their pride in buying a house.
Here’s a checklist of things that returning buyers can do:
- Get preapproved! This will take a lot of the anxiety out of the loan process, and will let you know right off the bat if its time to move forward with buying a house. This is the bandaid being ripped off, and once its done you can move forward with confidence.
- Be ready to make a down payment. Many of the loans that ended in foreclosure in the past did not require a down payment, so this is a good thing to be prepared for to avoid any disappointment if you did find a house you wanted to pursue.
- Make sure your three-year waiting period has passed so that you can qualify for an FHA loan. While many homeowners who have experienced a foreclosure are well within their ability to buy again, check the dates so that you’re ready if the question comes up.
- Keep an eye on your credit. Watch for errors on your credit report and be willing to dispute them. Try to keep your credit cards clean and paid from month to month.
Interested in getting started with a home search? We’d be happy to help.