Joining The Boomerang Boom? How To Know When You’re Ready To Buy (Again)

It’s hard to believe that the American housing market began its rapid decent almost ten years ago. Back in 2007, millions of Americans saw their home values take a dive and many of them found themselves in the midst of foreclosure.

As a result, lots of homeowners turned into renters, relocating to rental houses, condos and apartments as they repaired their credit and waited out the economic recession.

Fast forward to today and these Americans are returning to the real estate market ready to buy again. Dubbed “Boomerang Buyers,” many of these folks have either been resistant to jump back into a mortgage or don’t know if they are financial ready.

We recently spoke with Troy Silhan, a Production Manager with Bank of England Mortgage, who explained how buyers—whether boomerang or first-timers—can know when they’re ready and what to expect.

For a renter who has been “waiting out” the recession to buy again, how can they know when they’re financially ready? For anyone who is renting that was “harmed” by the economic downturn, the first thing they need to do is have their credit checked. Perhaps they had a foreclosure, a bankruptcy or they short sold their home, and it will depend on how those items are reported on their credit report.

Also, we want to see how long since those events have taken place. We also want to establish a credit score. If the score does not qualify, then the earlier they apply, the more time we have to help them with improving their score. To be financially ready, they need to get together income documents such as tax returns, W2s and pay stubs.

What is the first thing they should do to get started? First thing to do is get pre-qualified for a loan. This is where they will apply with a lender such as Bank of England. The loan originator will review credit, income and down payment options. It is important that the right expectation is set so that the buyer knows all the things they will need and what they are expected to do throughout the buying process. Don’t go out looking to buy a home before you know what you qualify for.

What is CAIVRS and whom could it affect when buying a home? CAIVERS is a code that is attached to everyone that is getting a government loan (FHA, VA, USDA). Say the borrower has a short sale or foreclosure on an FHA loan in the past, we would want to see a clear CAIVERS report. It does not mean that they cannot qualify for a loan again if they have a short sale or foreclosure. It just creates another step for us to see what the borrower has to do to clear CAIVERS.

What are the biggest changes to newer mortgages that boomerang borrowers will notice? It depends on when they purchased or refinanced last. If it was before 2009, then there is a huge difference, mostly due to the amount of paperwork. If they are working with someone who is hands-on, they will have a much easier time.

The biggest thing is to set the proper expectation. If a borrower knows they need specific documents, then they are not upset when asked for them by an underwriter. If they are not made aware, then it becomes a problem. Communication is the key.

What is your advice to a potential borrower who perhaps went through a foreclosure and is nervous to buy again? Let us take a look at credit. They need to know when the foreclosure took place and when the home was sold. That info is available online. At a minimum, they need to know the address of the property so we can look it up. Typically they must wait 3 years from the sale date of the property. It is not as hard as they might think and a foreclosure is not a “death sentence”. You can buy again.

Questions? Contact Troy Silhan at (904) 217-9489 or TSilhan@boejax.com.