If you’re planning to become a homeowner again, now is the right time to do it.
The real estate world doesn’t shun people who went through foreclosure. Rebound or boomerang buyers still have a chance to buy a new home, but they need to pass certain conditions to do so. Fortunately, there are opportunities in 2021 that can help a boomerang buyer easily purchase a new house.
Your strong motivation helps fuel your desire. However, you need a proper guidance system to help you move in the right direction. The current real estate conditions, as well as practical tips you’ll discover here, can act as your guide in becoming a homeowner again.
What Makes 2021 a Great Year for a Boomerang Buyer
Here are current opportunities you can take advantage of as a boomerang buyer:
The New CARES Act Softens Lenders
The CARES Act passed by Congress seeks to provide aid to people affected by the current global crisis. This legislation covers a broad range of economic relief and other benefits. But the most crucial aspect that’s beneficial for homeowners is mortgage forbearance.
In May 2020, around 8% of homeowners chose to avail of mortgage forbearance. Today, there are 2.7 million homeowners under mortgage forbearance, and the White House continues to extend the deadline. If you become a homeowner again during this period, you can benefit from this government relief package.
The legislation requires lenders to allow homeowners to opt into no-fault forbearance without having to go through hoops. In case you suddenly went through financial challenges, you can stop making mortgage payments without negatively impacting your credit score.
Forbearance can last for up to 12 months. You can pay the missing payments in three different ways:
- Pay the lump sum amount at the end of your mortgage
- Go through a catch-up plan
- Lenders will modify your loan to the amount you can afford to pay
This specific part of the CARES Act affects homeowners who have mortgages backed by the federal government, such as Fannie Mae, FHA, Freddie Mac, VA, and USDA.
This legislation can provide you a safety net, helping you to prevent another traumatic experience due to a foreclosure.
Mortgage Rates are Cut Down
Mortgage rates this year are at an all-time low. Federal funds interest rate is cut down by 0.5 percentage points to a range of 1% to 1.25% in early March. Another emergency rate cut – one percentage point to a range of 0% to 0.25% – happened two weeks later. It is the lowest Federal Reserve cut since the Great Recession.
It was due to these changes in federal funds interest rates that mortgage interest rates start to drop. Currently, the average rate sits at around 3.4% for a 30-year fixed-rate mortgage.
Buying a new home this year can help you save money. The rates can significantly lower your monthly payments, allowing you to save thousands of dollars over time. Depending on the plan, a rate that’s 1% lower can save you more than $100,000 throughout your mortgage payment
Home Prices Will Keep Rising
The low mortgage rates and increasing demands for houses resulted in higher home prices. Expect an increase of up to 2.6% every quarter this 2021, as Freddie Mac forecasted. While buyers will need to fork out a higher down payment, the low-interest rate makes it worth purchasing a home.
If you’re all set on buying a home, you should consider doing it as early as possible. In the year 2021, home prices will be higher by 5.7% compared to last year. Low mortgage rates can significantly help to blunt the impact. However, it won’t take long until mortgage benefits become almost negligible due to rising home prices.
Tips that Help Increase Your Chances of Becoming a Homeowner
Are you ready to take advantage of these incentives? Go through these tips to help ensure you have the best chances in owning a home again this year:
1. Make Sure you’re Past Waiting Period
Some lenders require you to wait up to seven years before they consider your loan application. However, there’s a way to get a loan sooner. The Federal Housing Administration (FHA) can issue a new loan after a three-year wait, as long as you have good credit.
2. Clean Up Your Credit History
While waiting for eligibility, use the time to improve your credit score. Since you went through foreclosure, it is crucial that you prove to lenders that you’ve mended your ways. Not only will you get loan approval, but you can even have the best possible loan rate.
3. Place Higher Down Payment
A 20% down payment will help ensure that you get the best rates. Besides, this offers a sign of good faith to lenders, especially since you’re a boomerang buyer. The combination of a higher down payment with lower mortgage rates helps to ease up monthly payments significantly.
Placing a 20% down payment helps you build equity faster since you’re financing less. Furthermore, you won’t have to pay an extra cost every month for private mortgage insurance (PMI) that lenders add to those with lower than 20% down.
4. Choose your Next Home Wisely
Buy your next home responsibly. As a boomerang buyer, you need to stay clear from homes on the top end of your budget. The allowable debt-to-income ratio that lenders give you is usually lower compared to typical buyers. You need to plan ahead of time and allocate a realistic budget when looking for a home.
Don’t go for any home you can find, even if it is within your budget. Find a house that is in a good location, increasing property resale value. Nearly 90% of homebuyers these days prefer single-family homes, more so because it’s less congested compared to a home in the city. For example, Washington Trace in Dayton, Ohio, has gorgeous single-family homes and excellent community features.
Become a Homeowner Again this 2021
This year is the perfect time for you to purchase a home again while mortgage rates are still low and house prices are not yet exceedingly high. Choose a home that not only accommodates your budget but matches your lifestyle as well.
Find the house that you want today at Oberer Homes.
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