FHA Makes Boomerang Home Buyers Eligible for Purchasing Four Years Earlier than with Conventional Lenders

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Best Rate Home Loans reports that a large number of previous homeowners who were forced into foreclosure during the recession have been getting back into the housing market in early 2013, according to recent analytics figures. And due to a policy in the Federal Housing Agency’s loan program that allows borrowers to put down a mortgage only three years after foreclosing on a home, such borrowers are reaping the rewards of extremely low down payment and mortgage rates.

FHA home loans

Estimates see the number of FHA-eligible borrowers who recently foreclosed at over 800,000 nationwide.

Compared to a waiting period of around seven years with conventional lenders, the three-year FHA refinancing option is extremely attractive to borrowers who have previously foreclosed.

Best Rate Home Loans, a national professional network of approved mortgage lenders and loan providers who specialize in FHA loans and other low down payment options, reports that the trend of “boomerang home buyers,” thus dubbed for their ability to re-enter the home buying market and make a purchase just years after losing a home to foreclosure or short sale, is catching on in a major way, and that borrowers looking to have a second chance at homeownership can do so more quickly and inexpensively through the FHA than any conventional lending program.

With the housing market surging back over the last year, due largely in part to government programs such as the FHA that have offered more lax FHA mortgage rates and credit score requirements than during recession times, millions of Americans who were previously renting are now becoming homeowners. This trend, however, does not simply apply to first-time homeowners or borrowers refinancing on their mortgages. As recent months have shown, Americans who’ve already dealt with the hardships of having a foreclosed mortgage are getting back in line to give homeownership another shot—and there is no option on the market more suited to boomerang buyers than FHA loans, which include the FHA’s borrower-friendly eligibility requirements.

CLICK HERE to check eligibility for an FHA loan.

Estimates from Moody’s Analytics see the number of FHA-eligible borrowers who recently foreclosed at over 800,000 currently, whereas the number was 285,000 in 2011. The number is expected to almost double from its current total to about 1.5 million in 2014. All this is due to a stipulation in FHA purchasing that says potential borrowers who previously foreclosed—but have been financially responsible since foreclosing—are eligible for an FHA loan only three years after foreclosing on their last mortgage. Compared to a waiting period of around seven years with conventional lenders, the three-year FHA refinancing program can be extremely attractive to borrowers who, despite having rebounded financially since their last foreclosure, are still unable to get a loan because of this now-meaningless blight on their mortgage history.

And when down payment rates of as low as 3.5 percent for FHA home loans are factored in, it’s clear why more and more borrowers are signing up for the program. A down payment on a conventional loan for a mortgagee with previous foreclosure history could be up to 20 percent of the home’s value. This means that whereas a borrower in this situation using a conventional lender with a 20 percent down payment rate would have to put down $100,000 on a $500,000 loan, an FHA borrower with a 3.5 percent rate would only have to put down $17,500, or $82,500 less. Incentives like these can make or break a borrower’s ability to buy a new home.

“The rising value of the housing market mixed with the number of previously foreclosed buyers who have since become financially stable creates a great demand among boomerang buyers,” says Scott Schang, Branch Manager at Broadview Mortgage Katella Branch. “And thanks to the short turnaround time and incredibly low down payment and mortgage rates, FHA lending is quickly becoming one of the most surefire solutions on the market for borrowers in this scenario.”

About FHA loans:

The FHA has insured more than 34 million homes since the program was created in 1934.

In comparison with the difficult underwriting laws of conventional mortgages, FHA-insured loans cater to a broader range of homebuyers by providing more relaxed credit standards, lower down payment options and more diverse income calculations.

Upsides of an FHA loan include:

Low down payment
Borrower-friendly credit guidelines
Streamlined refinancing ability
All-in-one home renewal loans

Click Here to check your FHA Loan Eligibility.

Best Rate Home Loans is a national professional network of approved mortgage lenders and loan providers who specialize in FHA loans and other low down payment or streamlined refinance options Call 888-269-5585 for further information on the Boomerang Home Buyer Program.

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Mark Madsen

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