Boomerang buyers.  Catchy, huh?  Sounds like some foreigner to Australia, roaming the outback looking for makers of boomerangs, so that they can export them back to their native land”¦ and get rich.  Okay, fine. That’s not it at all.

Boomerang buyers are actually the group of buyers that went through a significant derogatory credit event.  What are those?  Oh, things like bankruptcy, foreclosure, short sale, deed-in-lieu of foreclosure, or any combination of the above.  However, now they’ve “done their time” in waiting and are now able to finance a home again.  Get it?  They are “returning” to the pool of buyers that can now finance a home buying venture.  Clever.

The housing and economic crisis that started towards the end of 2007 impacted nearly every American in some way in the following years.  Some were more impacted than others, but everyone was impacted either way.  What we’re going to cover today is the general overview of what these timelines are, and how they relate to the most common loan types.

Fannie Mae, also commonly known as a Conventional loan, has the most layers depending on the circumstances.  If you suffered a:

Foreclosure: Your wait is going to be the longest, at 7 years, to finance with a conventional loan.  But, if you suffered a foreclosure on a mortgage that was included in a Bankruptcy, you’ll use the timeline for a bankruptcy.

Short Sale or Pre-Foreclosure Sale: You’ll have to wait 4 years.

Deed-in-Lieu of Foreclosure:  You’ll have to wait the same time as a short sale – 4 years.

Chapter 7 Bankruptcy: You’ll have to wait 4 years from the discharge or dismissal date.

Chapter 13 Bankruptcy: The wait is 2 years from the discharge date, or 4 years from the dismissal date.

FHA is the common loan for a first time Real Estate Property Buyer, or a buyer that has little down-payment or less than excellent credit.  FHA loans are insured by the government against borrower default, and have a little more flexibility than Conventional loans.

Foreclosure: Your wait is going to be 3 years to finance with an FHA loan.

Short Sale or Pre-Foreclosure Sale: You’ll have to wait 3 years if your mortgage was in default at the time of the completion of your short sale.  You will be considered eligible for an FHA mortgage if you suffered no late payments over 30 days in the 12 months preceding your short sale, and all other installment debt was paid on time in the same period.  One caveat to this would be that if it was determined that you short sold to take advantage of declining market conditions (also known as a strategic short sale) and will be buying a similar or superior property within a reasonable commuting distance to the old property.  Basically, they don’t want to insure your new loan if you’re just trying to have your cake and eat it, too.

Deed-in-Lieu of Foreclosure:  You’ll have to wait the same 3 years as a foreclosure and short sale.

Chapter 7 Bankruptcy: You’ll have to wait 2 years from the discharge or dismissal date.

Chapter 13 Bankruptcy: The wait is 1 year of a payout period that has elapsed and permission must be granted by the court to enter into a new mortgage obligation while under the current bankruptcy payout period.

One thing to note regarding the bankruptcy period.  If you had a mortgage that was included in the bankruptcy, you would follow the appropriate timeline of foreclosure or short sale of when that property was taken out of your name.

VA Loans are insured by the Veteran’s Administration and are only able to be used by servicemembers and veterans that are eligible.  These timelines are the most generous of the three types we’re looking at today.

Foreclosure: 2 years from the date the foreclosure was completed.

Short Sale or Pre-Foreclosure Sale: Also 2 years of a waiting period.

Deed-in-Lieu of Foreclosure:  You’ll have to wait the same 2 years as a foreclosure or short sale.

Chapter 7 Bankruptcy: You’ll have to wait 2 years from the discharge or dismissal date.

Chapter 13 Bankruptcy: The wait is 1 year of a payout period that has elapsed and permission must be granted by the court to enter into a new mortgage obligation while under the current bankruptcy payout period.  Same as FHA. Chapter 7 and Chapter 13 are the commonest bankruptcy types filed by people who are facing huge debts. They are designed to protect consumers from the collection efforts of creditors who wish to recoup their money. This is explained further at this article titled “Chapter 7 and Chapter 13 Bankruptcy: What Are the Exemptions“.

An additional caveat on VA.  If the derogatory event happened on a VA tradeline, it may have impacted your eligibility on a future VA loan.  So, even though you’ve met the timeline requirements, you still may not have eligibility to use your VA benefits to finance a home until that is cleared up between you and the VA.

 

Again, this is a high level snapshot of the waiting periods to be able to buy a home again.  Everyone has different specific circumstances, so these guides will be applied differently.  If you feel that you’ve done your time and you want to have a conversation about your options to buy again, just reach out to me and we can see where you’re at.

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