The housing market is getting a boost in buyers. The housing crisis caused millions of people to lose their homes to foreclosure. But in the next few years we’re going to see more and more of these people get back into the market to buy a home again.
Why is this happening? For FHA, Fannie Mae, Freddie Mac, and VA loans, a sufficient amount of time, known as a “waiting period,” has to have passed since a foreclosure or short sale was completed before you’re eligible to buy a home again. For many of these people the waiting period is over. These former homeowners have gotten out of debt, cleaned up their credit, and are ready to own a home again.
According to an article this month in the Detroit Free Press, more than 4.7 million homeowners are estimated to have lost homes to foreclosure or short sale since 2007. Now that the housing crisis is now six years past, 2013 is expected to be the first big year for boomerang buyers, accounting for 10% of home sales, up from 4% last year. John Burns Consulting estimates this group of boomerang buyers who lost homes in 2007 through 2012 will exceed 500,000 a year in 2013 through 2016.
This influx of home buyers will have a definite positive impact on the housing market. More buyers searching for homes will lead to more home sales. But the market is also affected by the fact that there are fewer homes on the market than last year. This year, there are 24,918 homes listed for sale for the month of April, 24% lower than it was last April. The combination of more buyers and the current low inventory of homes will mean increased competition for homes as well.
We’re also seeing more home buyers return because of the increase in rents which have gone up substantially, especially here in Massachusetts. The average monthly rent in the Metro Boston area for an apartment is now $2,328*. Meanwhile, interest rates for mortgages have stayed at record low levels—around 3.47% for a 30 year fixed rate as of this writing—making owning a home more affordable than renting an apartment. For instance, if you were to put 10% on a $300,000 home, the monthly payment would be about $1,212, much less than the average rent in Boston.
Buying a Home After a Foreclosure or Short Sale
One of the first steps in buying a home again after a foreclosure or short sale is finding the right mortgage broker who specializes in post-foreclosure or post-short sale loans. They can guide you through the application process and help you find the best rate.
This time around, buyers should be especially cautious to buy a home that they can afford. Though your finances may be back on track, you don’t want to get into a situation where you won’t be able to afford your home again. As we say in our video, Buy a Home You Can Afford, the trick is to buy a home that allows you to get into a mortgage that you can pay in good times and in bad. Factor in the possibility of changes to your income if you had a change in job or medical expenses. Though your mortgage payment can be lower than renting, you must also factor in other costs of owning a home such as maintenance, repairs, and utility bills. Download our Home Buyer Budget Worksheet to calculate your expenses to figure out how much you can truly afford.
Once the appropriate waiting period has passed, you can be eligible for a mortgage loan after a foreclosure or short sale as long as your credit is again in good standing and you have sufficient income to make payments.
The waiting periods for each type of situation, short sale or foreclosure, are dependent upon the type of loan you pursue.
More and more people are discovering that buying a home again after a foreclosure or short sale is not out of their reach. By taking steps to repair credit and keeping better track of their finances, they realize they can be homeowners once again.