Some housing experts are trumpeting changes that allow foreclosure sufferers to buy back into the American Dream sooner than they probably imagined, calling 2014 the year of the "boomerang buyer". Revisions made to the FHA guidelines and Fannie Mae loan approval systems have opened the door for some former homeowners to buy again just one year after froeclosure.
Investors, who bolstered home sales during the real estate recovery, will reduce purchases as prices climb. Recent college graduates with student debt might not have the means to buy. And underwater homeowners are still stuck in a holding pattern - unable to sell so they can move up and buy anew. People who are primed to buy are the ones who qulaify on all levels but had a short sale or foreclosure on their record. The refinance boom is over and lenders are looking for new ways to capture more business.
Under the FHA's "Back to Work" program, it will approve certain borrowers for a home loan just one year after a foreclosure, short sale, deed in lieu of foreclosure or bankruptcy. FHA's previous time line was three years for a short sale and foreclosure and two years for a bankruptcy. The foreclosure or short sale should be the only blemish on a credit report, and for an FHA mortgage, the homeowner must tak a housing counseling class.
But there is a reality check. People who can get a loan might not always be able to find a house. They're coming back into a market with low interest rates, but also low inventory. And because they have a default on their record, they may not qualify for the amount of loan they want. A lot of people who did a short sale for a low price are getting back in the market and have sticker shock. The prices are higher and financing is a challenge.