Are You a Boomerang Buyer? You’re Not Alone.
During the last decade of the housing market crash & following recession, many Sacramento Boomerang Buyers wanted out of their mortgage without going through a formal foreclosure and opted to go for a deed in lieu of foreclosure (DIL). That means that they handed their lenders the keys to their home and the deed. In effect, this canceled out their mortgage. The lender in turn agreed not to initiate foreclosure proceedings, or discontinued them if they were already underway.
The outcome of doing a (DIL) was to leave their homes without suffering mortgage deficiency. (“Deficiency” occurs when the lender doesn’t get enough from selling your home to cover the entire balance of your loan.) This allowed many buyers to reestablish their credit quickly and prepare for a future mortgage when conditions improve. But lenders still consider a DIL as serious as a foreclosure, because you didn’t repay your mortgage as you originally agreed to. Still a large percentage of these buyers have improved their situations as the market rebounded and are contributing to it’s revitalization.
So, can you get a new mortgage after a DIL?
How long do you have to wait to reapply? Which lenders offer loans to buyers who’ve had a DIL? How do different lenders underwrite a mortgage with these types of buyers?
These are questions many “boomerang buyers” — someone trying to buy after a foreclosure, short-sale, 60-day delinquency, loan mediation or a DIL — often ask before re-entering the Sacramento housing market. If yours was a strategic mortgage default where you gave up your home for a DIL because you were underwater, lenders will trust you much less. That’s because lenders consider a DIL just as bad as a foreclosure, they think the decision you made before increases the odds you’ll do it again. Although conditions have improved, they are just as competitive right now as Boomerangs compete with Millenials for the same homes.
Strategic Mortgage Default Was as a Business Decision
Many Sacramento homeowners that did a DIL had a job, a good income, good credit and savings. The choice they made to turn over their home in lieu of foreclosure was a sound business decision when it became a poor investment. Even still, though this decision might have been a solid financial strategy, financing another property in the future will be difficult.
The mandatory wait after a DIL to get a new mortgage is four years for a conforming (Fannie Mae or Freddie Mac) loan (up to seven years for a jumbo loan) under current regulations.
FHA Back To Work Program Expired
The FHA’s “Back to Work” program, which allowed for shorter waiting periods after a DIL, it expired in September 30, 2016. Currently, FHA requires a three-year waiting period for all who have a deed in lieu or a foreclosure in their recent past. Veterans and active servicemen that are eligible for VA mortgages still have to wait at least two years after a DIL in most cases. These days CASH TALKS. Hard money lenders will still provide alternative financing even one day after executing a deed in lieu of foreclosure — if you’re willing to pay for the privilege. These lenders offer flexible underwriting as long as you have a substantial down payment, and can afford the higher fees and interest rates that go along with “non-prime” or “non-QM” financing.