Getting back into the market
The NAR finds that as many as 950,000 distressed sellers already are eligible for financing through Federal Housing Administration or other programs. (Read 7 crucial facts about FHA loans.) NAR expects that another 1.5 million distressed sellers will become eligible in the next five years and likely be interested in buying again.
The NAR draws a distinction between buyers who got prime mortgages during the housing boom and those buyers and refinancers who got subprime mortgages. It estimates that as many as 82 percent of distressed sellers in the prime category are likely to be interested in buying again.
What about subprime borrowers?
Many subprime buyers got loans through lax underwriting, They are likely to face a tougher time getting back to homeownership. Regulations now require lenders to prove borrowers' ability to repay. Stricter lending standards mean many of these borrowers will not qualify mortgages.
Where are the boomerang borrowers buying?
From 2006 through 2014, California saw the most number of return buyers, followed by Florida and Arizona. California and Florida are expected to top the list through 2023.
If you went through a short sale, you saw your credit score drop as much as 125 points. If you went through foreclosure, it might have fallen as much as 160 points. The drop was even worse if you defaulted on other debt such as a car loan.
Newer credit-scoring models, such as FICO 9 and Vantage Score 3, might help your chances if you were a distressed seller. And rebuilding good credit over the years improves the prospect of getting a mortgage.
According to Lawrence Yun, NAR's chief economist, "Borrowers with restored credit will likely have the ability and desire to own again, encouraged by the long-term benefits homeownership provides in a stronger economy and more stable job market."