Home owners who once lost their home to foreclosure have returned to the market, eager to buy once again.  Foxy and Fred

These “boomerang buyers” could make up a large number of the future housing market, considering their numbers. Since the housing crash, 4.8 million borrowers have lost their home to foreclosure and 2.2 million did a short sale, according to RealtyTrac data.

As these borrowers get their finances in shape, repair their credit scores, and save up for a down payment, they’ll be looking to buy again, but their struggle will be over when they’ll be eligible to buy again.

Fannie Mae and Freddie Mac require those who once defaulted on their mortgages to wait five years and have a minimum of a 680 credit score and a 10 percent down payment. If they don’t have all that, they’ll have to wait seven years to qualify again. By seven years, a foreclosure is removed from a person’s credit report.

But if a defaulter can show the foreclosure was due to a hardship — like losing a job or illness — the wait may be reduced to three years, CNNMoney reports.

And some home owners have even be able to buy again after just two years of losing their home to foreclosure. For example, one Palmdale, Calif., couple says that after losing their home to foreclosure due to an illness that made it difficult for one spouse to work, they were able to buy again after two years. During those two years of being sidelined by the housing market, they made sure to pay all their bills on time, repair their credit score, and get their finances back in shape. They were able to qualify for a Veterans Administration-backed loan.

“[After bankruptcy], foreclosure is one of the things that hits your credit score the hardest,” says Anthony Sprauve, a spokesman for FICO. For example, foreclosures and short sales can decrease a credit score by anywhere from 85 to 160 points.

Source: “Boomerang buyers return to market after foreclosure,” CNNMoney (March 11, 2013)

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