Attention sellers, builders, lenders and oh, yes, real estate agents. Did you know that there is a new breed of buyers out there wanting to purchase a home? We have never seen these people before in the real estate market, because they never really existed until four or five years ago. This country has never seen a real estate crash like we had over the last four or five years, and that single event created a new demographic that did not previously exist. Here is their profile:
These people may have had good jobs, made good money, and had good credit but got caught losing their jobs as a result of the real estate crash. In turn, they may have lost their houses to foreclosures or short sales. Today, these people may be back on their feet or just getting re-established. They may have good jobs now, make great income, but are in the waiting game with regards to their credit and when they will qualify again to buy a home. So what can you do to help this new breed of buyers realize their dream of home ownership again?
Requirements of when they will qualify again differ greatly from Fannie Mae to Freddie Mac to FHA to Conventional. It’s been a general rule and still is today that someone who went through a foreclosure must wait seven years before becoming qualified for another home loan. If that buyer is in Year One or Year Two, real estate agents should reach out to and help him or her establish a strategy to be ready in five or six years to purchase again. That could mean putting the buyer in touch with someone that has an expertise in credit restoration (this is a new profession as a result of this new breed of buyers). It could also mean counseling the buyer on the down payment requirements that are needed in the future, as well as and having this buyer establish a savings account for that down payment.
For those who are just one or two years away from qualifying, a real estate agent could be a valuable tool to let them know which lending products are out there that could help them get back into a house right away. For example, many lenders are now offering a 3% down payment on a conventional loan for qualified buyers. This can avoid upfront mortgage insurance that is required with other products like FHA. The monthly mortgage insurance with this conventional loan is much lower than FHA, and the monthly insurance falls off when the buyer reaches 20% equity in their home. The monthly mortgage insurance currently being offered with FHA never falls off the loan no matter how much equity you achieve.
Short sales are a bit different. The buyers who have gone through a short sale are eligible to buy again anywhere between 2-3 years depending on the lending product. One solution for these buyers who want to get into a house right away and not wait for three years may be to structure a “seller carry option”. Having a seller carry the mortgage until these people can qualify is becoming more and more popular these days. Don’t disregard this option; you’ll see a lot more of this in the weeks and months to come.
Those are just a few of the options open to this demographic of buyers. I think people forget that our friends, neighbors and colleagues who went through foreclosures and short sales are for most part good people. Many just got caught in a bad spot at the wrong time. I think it is incumbent on us as Realtors to be educated and ready to help them own a home again if they so choose.
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