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Foreclosure and Loan Modification Blog

Boomerangs Aren't Just an Australian Invention - Buying a Home after Foreclosure

[fa icon="clock-o"] Monday, June 2, 2014 [fa icon="user"] Madel Bermudez [fa icon="folder-open'] foreclosure defense

So what's this about boomerangs? You mean those wooden tools that were first made in Australia, you know, those objects that you throw and they come right back to you? Well... Not Exactly

BOOMERANG BUYER.

Boomerang buyer is a term of art, and it is used to describe the homeowners that underwent foreclosure and are now ready to buy another home. Hm, clever or....? I know it sounds kind of crazy, but there are many people who go through the stress and anguish of losing a home to foreclosure, yet soon enough, they want to buy again. Are these people sane or do they need a pinch? The first thing you're probably asking yourself is can they even do that?

The simple and straightforward answer is YES they can.

Buy-home-after-foreclosure

Losing a home (by home I mean the place one puts their hopes, dreams, a not to mention endless amounts of dollars $$$$$$$$$$$) is stressful in and of itself. A home (not just a house) is where one goes after that long 9-5 to relax, hang out with the kids , and play with the dog. Now tell me, how can losing such a place not be heartbreaking. Well, not heartbreaking enough because there are people willing to take the plunge at another house after all of that trouble. So are they playing Russian Roulette? Not quite.

The people that are willing to take the chance of buying another home after foreclosure are actually quite smart. Why is that? Simply because a home is an investment. One buys a property to secure their future living arrangements, for when they turn gray and old, they have somewhere stable to live for the rest of their days. Also, if all goes well and the mortgage payments are fully completed, that home becomes an asset, which translates to accessible cash if liquidated. Whereas if one simply rents, they are putting their money towards nothing in return for the future. So whats better? Investing or giving money away to get nothing in return? Of course the smartest answer is investing. That is why the homeowners that have been through foreclosure are ready take on a new risk. Not so crazy anymore huh?

How can they purchase again? Isn't their credit depleted from the last foreclosure? purchase-home-credit-depleted

Just because someone has been through foreclosure does not automatically bar them from ever owning another home. Everything heals with time, just like a wound (except this wound is a deep one, therefore, it takes a little more time, nevertheless, it always heals).

So how long exactly does it take for this wound to heal??

This depends, waiting and waiting and waiting for the chance to build up the credit to secure another loan is a PENALTY for the foreclosed homeowner. It is not as easy as forgive and forget when it comes to credit (there are no get out of jail free cards in the game of REAL LIFE). Typically, the waiting periods for new loans vary among the different type of lenders (Fannie Mae, Freddie Mac....). However, the FHA (Federal Housing Administration) imposes a less stringent 3 year guideline to obtain a new FHA loan.

Nevertheless, do not think that just about everyone can jump on that 3 year (FHA) bandwagon just yet. Most people whose only crushing debt was foreclosure can repair their credit damage much easier than say, a person that has the foreclosure combined with credit card debt dating back to the prehistoric era (a lot of debt!). This goes out to all of you who love to indulge in high fashion couture or (** insert anything extremely expensive you like to spend mounds of money on) , so take my advise, do not indulge, control yourselves, especially if you want to heal enough to be ALLOWED to invest in a home again. 

The standard period to be able to buy back a home ranges at about 7 years ( for Fannie Mae and other chartered corporations that purchase home securities). Yes, 7 whopping years, think about how much one goes through in 7 years! Again, this 7 year period is not a guarantee. I cannot stress enough how important it is to keep your credit in impeccable condition. So, in those 7 years, which I know seems like forever, make sure that you save money for a decent down payment AND live within your means (I know you like to buy stuff, who doesn't? But just get what you can afford) . raise-credit-buy-home

There are few and far between exceptions to the 7 year period. By few and far between I mean extenuating circumstances, and by that I mean not the run of the mill flu. Extenuating circumstances mean divorce, serious illness, death in the family, or job loss. Those are pretty bad circumstances if you ask me, that is why they are extenuating, and why one might be able to secure a mortgage without having to wait the 7 year period.

Again, I know I sound like a broken record, but notwithstanding the required waiting periods,you must maintain a good credit score. If you want to be able to secure a loan and invest in a home once again, you HAVE TO cut down on the reckless spending, watch your finances closely, and live within your means. Not to mention, saving up a little money helps a ton too!

There you have it, if you're scared you will never be able to buy a home again after foreclosure, well, don't be. You can, credit heals with time (if you follow the tips above of course), and with sensible practices, you can be on the road again to a great investment.

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Madel Bermudez

Written by Madel Bermudez

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Amerihope Alliance Legal Services is a leading loan modification and foreclosure defense law firm with attorneys licensed in 5 states. We have helped over 7,000 homeowners fight back and keep their homes.

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Our goal is to provide valuable information to help homeowners who are trying to obtain a loan modification or to stop foreclosure. You may schedule a free consultation at any time.

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