2015 is already shaping up to be the year of the Boomerang buyer (repeat home buyer). As it is 7 years since the housing downturn started, lots of buyers who suffered a financial hardship in the recent past are getting back into the market to purchase a home again in 2015. There were several changes recently to the waiting periods when a borrower can obtain a new mortgage and repurchase a home again after a Foreclosure, short sale or bankruptcy, here is a summary of these waiting periods below.
Boomerang Buyers are back in the market.
As the housing downturn started back in 2008, there are many buyers who suffered a financial hardship who are now back in the market to purchase a home. Here are some results from a recent survey by Afterforeclosure.com.
The survey reports that 79% of those who lost their home are interested in buying again, 41% of buyers have higher incomes than before the housing crash, 63% report their debts are lower than before the crash, and 46% want to purchase in a lower price range.
The survey also reports that buyers are unaware of programs available to them to help them purchase after just a year or two, therefore knowing the time lines when buyers can repurchase again after foreclosure or short sale is very important.
2015 Waiting Periods When a Buyer can Repurchase After a Short Sale, Foreclosure or BK
Buyers today essentially have 3 options when it comes to obtaining financing to purchase a home. In fact, more than 9 out of 10 mortgages are either funded by Fannie Mae/Freddie Mac, the FHA or VA!
So if a buyer is looking to purchase and needs financing, it is more than likely they will be using one of these 3 financing options. Here are the current 2015 waiting periods when a buyer is looking to repurchase a home after either a short sale, foreclosure or bankruptcy.
1. When Can I Repurchase Again After a Foreclosure?
Here are the time lines for when a buyer can repurchase again after a Foreclosure and they are trying to obtain either Conventional, FHA or VA financing.
Conventional. It is 7 years before a buyer can repurchase again using conventional financing.
New Rule added. There was a new change implemented recently (see below), whereby if you included the foreclosure in a bankruptcy, you can qualify after 4 years instead of 7 years. Contact me for more details on how to qualify under this new rule.
“For conventional financing, the bankruptcy guidelines have been updated to indicate that if a mortgage debt has been discharged through bankruptcy, even if a foreclosure action is subsequently completed to reclaim the property in satisfaction of the debt, the borrower is held to the bankruptcy waiting periods and not the foreclosure waiting period. This means a buyer can now qualify for conventional financing after 4 years from the bankruptcy date, instead of the foreclosure date of 7 years”.
FHA. It is 3 years before a buyer can repurchase again using FHA financing. Or, see below for how a FHA buyer can qualify again after just 1 year if they experienced an economic event.
VA. It is only 2 years before a buyer can repurchase again using VA financing.
2. When Can I Repurchase Again After a Short sale?
Here are the time lines for when a buyer can repurchase again after a Short Sale and they are trying to obtain either Conventional, FHA or VA financing.
Conventional. It is 4 years before a buyer can repurchase again using Conventional financing. Please note, it is used to be 2 years if a buyer had 20% down, but this was updated recently to 4 years no matter how much the down payment is.
FHA. It is 3 years before a buyer can repurchase again using FHA financing.
*FHA TIP: The FHA has a loophole that not many people know about, if the FHA buyer did not have any late payments before their short sale, they are allowed to automatically qualify again for FHA financing.
New FHA Short Sale Rule. The FHA announced in late 2013 they have reduced the time line that buyers must wait after a bankruptcy, foreclosure or short sale before qualifying for an FHA-backed mortgage, if a buyer experienced an “economic event” whereby their household income fell by 20% or more for a period of at least six months.
The period had previously been two years following a bankruptcy, and three years following a foreclosure or short sale. The agency has now reduced the waiting period to ONE YEAR.
For additional information on how to qualify under this new rule, I wrote an article recently on this subject for the San Diego Union Tribune newspaper, see HERE
VA. It is only 2 years before a buyer can repurchase again using VA financing.
3. When Can I Repurchase Again After Bankruptcy?
Here are the time lines for when a buyer can purchase again after a Bankruptcy and they are trying to obtain either Conventional, FHA or VA financing.
Conventional. For a chapter 7 Bankruptcy it is 4 years and 2 years for a chapter 13 bankruptcy, before a buyer can repurchase again using Conventional financing.
FHA. For a chapter 7 Bankruptcy it is 2 years and 1 year for a chapter 13, before a buyer can repurchase again using FHA financing. Or, see above for how a buyer can qualify again after just 1 year if they experienced an economic event.
VA. For a chapter 7 Bankruptcy it is 2 years, and 1 year for a chapter 13 bankruptcy, before a buyer can repurchase again using VA financing.
4. What if I don’t fit the rules above?
There are new mortgage options available for buyers who do not fit these more traditional mortgage options above.
Portfolio lenders are stepping in to provide mortgage options for buyers who cannot qualify for conventional, FHA and VA financing, and with terms much better than private financing.
We have lenders who will provide financing for buyers less than 6 moths out of a foreclosure, short sale or BK for example. A larger down payment will be required of course, and rates will be higher than traditional loans. Contact me for more details on how to qualify for these new mortgage programs.
Helping Buyers Rebuild Their Credit
It is also very important that buyers have started to re-establish their credit again since their hardship. For example, even though the required waiting period of say 2 or 3 years may have passed, it is also important that buyers have the required credit scores to qualify again for financing. For example, the FHA and VA only require a 580 credit score to repurchase a home again.
The first step is for a buyer to get a copy of their credit report to verify if their financial hardship or discharge is reporting correctly and to also see what their scores are.
Then the next step is for buyers to start rebuilding credit scores. You can check out my “Credit Education and Improvement” section on my website (see HERE ), which is devoted to helping buyers and consumers understand how credit works and how to improve their scores, so they are able to score the best rates and financing terms.
Tips for Buyers Looking to Purchase Again
There are many buyers who suffered a financial hardship in the recent past who are already back in the market again to purchase a home. As the VA only requires 2 years from a short sale or a foreclosure, and the FHA only 1 year in some cases, there are a lot more buyers who are eligible to repurchase again but probably just don’t know they can.
A lot of buyers I talk to who suffered a financial hardship in the past, are genuinely surprised when they realize that the FHA or VA for example allows them to purchase again after just 2-3 years!
Tip for real estate agents, a good idea is to check the dates with any clients, friends or family you helped short sale in the past, or anyone who had a foreclosure, and verify how much time has elapsed since their hardship, so now you can let them know when they can repurchase again using these waiting periods above.
Make sure your buyers know too how important it is that they rebuild their credit, and that they should contact you if they need credit tips on how to rebuild their credit.
I also wrote a piece for the San Diego Union Tribune discussing these topics above, which explain the “Guidelines for repurchasing a home after a Financial Hardship'” you can check it out HERE
If you have any questions about any of these repurchase time lines above, or you would like to get approved for financing, please do not hesitate to contact me directly at 858-442-2686.
