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October 22, 2014

Foreclosed Home Owners Find a Way to Buy Again

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Foreclosed Home Owners Find a Way to Buy Again

Once-foreclosed home owners are slowly making a comeback in the housing market as some lenders give them a second chance at home ownership. 

After defaulting on their home loans or doing a short sale on their previous homes in recent years, some home owners have found a way to buy again, Reuters News reports. 

The Federal Housing Agency is the main way paving a comeback for these former home owners to buy again, according to Reuters’ interviews with lenders and real estate professionals. FHA loans can be an option for some who defaulted on their mortgage or did a short sale. FHA borrowers usually need a credit score of at least 620 and a 3.5 percent down payment, which are lower requirements than most conventional mortgages. 

"These are not mainstream programs geared for mainstream borrowers," Greg McBride, senior financial analyst at Bankrate.com, told Reuters about former home owners using FHA-backed loans to get back into home ownership.

Still, home owners with mortgage defaults on their records often find its a long way to crawl back into the housing market. They must make big strides in boosting their credit scores after a foreclosure, short sale, or bankruptcy. 

"Most of the loans that are getting done are for people who have really rebuilt their credit," rank Donnelly, president of the Mortgage Bankers Association of Metropolitan Washington, D.C., told Reuters. "They have to prove (to the lender that) it was something like a job loss that caused this and not chronic delinquency."

Lenders will take into consideration why the person lost their home previously, and they’re much more likely to try again on a borrower who lost their home due to a job loss than a borrower who walked away on their prior home even though they could still afford the mortgage payments. 

Source: “Back from Foreclosure to Homeownership,” Reuters News (May 16, 2012)

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